Investments http://www.businessinsider.com/category/investments
en-usWed, 13 Dec 2017 22:09:10 -0500Wed, 13 Dec 2017 22:09:10 -0500The latest news on Investments from Business Insiderhttp://static3.businessinsider.com/assets/images/bilogo-250x36-wide-rev.pngBusiness Insiderhttp://www.businessinsider.com
http://www.businessinsider.com/how-to-make-risky-investments-2017-7Big-name investors are using a '1% rule' to make risky bets that won't devastate you — but could pay off big-timehttp://www.businessinsider.com/how-to-make-risky-investments-2017-7
Fri, 21 Jul 2017 10:56:00 -0400Lauren Lyons Cole
<p><img style="float:right;" src="http://static2.businessinsider.com/image/5592eec46bb3f71978169e90-2400/chamath-palihapitiya-socialcapital-partnership-sv100-2015.jpg" alt="Chamath Palihapitiya, social+capital partnership, sv100 2015" data-mce-source="Brian Ach/Getty" data-mce-caption="Chamath Palihapitiya of Social+Capital Partnership speaks onstage at the TechCrunch Disrupt NY 2013 at The Manhattan Center on April 29, 2013 in New York City. (Photo by Brian Ach/Getty Images for TechCrunch)"></p><p>To the uninitiated, investing can seem like gambling. <a href="http://www.businessinsider.com/when-investing-in-stocks-becomes-legalized-gambling-2012-4">And in some cases, it is</a>.</p>
<p>But when big-name investors <a href="http://www.businessinsider.com/bitcoin-price-bill-miller-making-killing-after-putting-1-of-net-worth-in-bitcoin-2017-7">make big returns look easy</a>, it's tempting to roll the dice yourself.</p>
<p>The latest craze to catch the attention of the mainstream investing community revolves around <a href="http://www.businessinsider.com/bitcoin-price-is-making-a-big-comeback-2017-5">cryptocurrencies, such as Bitcoin and Ethereum</a>. Jason Calacanis, an early investor in startups including Robinhood and Uber, recently tweeted a question about the appropriate percentage to invest in the volatile cryptocurrency Ethereum, as <a href="http://www.businessinsider.com/ethers-value-volatility-investors-staying-put-2017-7">Business Insider's Becky Peterson reported</a>.</p>
<p>Chamath Palihapitiya, an early Facebook employee and <a href="https://twitter.com/chamath/status/883790139490578432">Silicon Valley investor, responded simply</a>: "1%."</p>
<p>When it comes to these types of investments, 1% seems to be a common theme among successful investors.</p>
<p>Bill Miller, a portfolio manager and investor who famously beat the market for 15 consecutive years while at investment management firm Legg Mason, recently <a href="https://www.forbes.com/sites/antoinegara/2017/07/18/the-unreformed-stock-picker-without-a-boss-bill-miller-is-betting-on-amazon-bitcoin-and-bob-dylan/#60e6494e49f8" target="_blank" rel="noopener noreferrer">spoke to Forbes' Antoine Gara</a> about his decision to invest in Bitcoin:</p>
<p>"In 2014, he put 1% of his net worth into Bitcoin, judging that the digital currency's potential for large-scale economic disruption outweighed the risk of a total loss. He's up nearly tenfold, and Bitcoin is now a top holding of his hedge fund," <a href="https://www.forbes.com/sites/antoinegara/2017/07/18/the-unreformed-stock-picker-without-a-boss-bill-miller-is-betting-on-amazon-bitcoin-and-bob-dylan/#60e6494e49f8">Gara reported</a>.</p>
<p>Miller, as Gara reported, weighed the upside of Bitcoin against "the risk of a total loss" — a statement that surely wasn't hyperbole. Despite coming to the conclusion that the potential reward of investing in Bitcoin was worth the risk, Miller still capped his investment at 1% of his net worth.</p>
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I think I need to own some <a href="https://twitter.com/hashtag/Etherium?src=hash">#Etherium</a> -- what % of net worth would you allocate to crypto as a 46 year old with stable income? <a href="https://t.co/VWX9QS3QGM">pic.twitter.com/VWX9QS3QGM</a> </p>— jason (@Jason) <a href="https://twitter.com/mims/statuses/883761410345279488">July 8, 2017</a>
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1% </p>— Chamath Palihapitiya (@chamath) <a href="https://twitter.com/mims/statuses/883790139490578432">July 8, 2017</a>
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<p>There may be something to that advice.</p>
<p>Limiting the percentage of your net worth tied up in a risky investment such as Bitcoin or Ethereum can protect against devastating losses, while allowing for big returns if you get it right, as Miller did. </p>
<p>All investments stand the risk of going to zero — some more than others — so it's wise to invest no more than you can afford to lose. Especially since investors miss the mark more often than not.</p>
<p>Among financial professionals, a staggering 92.2% of large-cap mutual fund managers failed to beat the S&amp;P 500, their respective index, during the 15-year period ending in 2016, <a href="https://us.spindices.com/documents/spiva/spiva-us-year-end-2016.pdf" target="_blank" rel="noopener noreferrer">according to the SPIVA scorecard recently released by financial research firm Standard and Poor's</a>.</p>
<p>Individual investors don't fare much better. As of July 20, the average investor is up 8.63% in 2017, a full three percentage points lower than the 11.75% return from the S&amp;P 500 during the same time frame, <a href="https://openfolio.com/data/" target="_blank" rel="noopener noreferrer">according to Openfolio data</a>.</p>
<p>In other words, your chances of making a killing like Miller did with Bitcoin aren't very high. Capping your exposure to a relatively small percentage of your portfolio — by following the '1% rule' — may be a smart way to try your luck without the risk of losing it all.</p>
<p>Just remember — if you're buying, someone else is selling. And that person on the other side of the trade may know something you don't.</p>
<p>When in doubt, there's always <a href="http://www.businessinsider.com/warren-buffett-best-investment-advice-on-low-cost-fund-2017-5">Warren Buffett's advice to stick with a simple S&amp;P 500 index fund</a>. You won't beat the market that way, but then again most of the investing pros don't, either.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/warren-buffett-best-investment-advice-on-low-cost-fund-2017-5" >Warren Buffett thinks the 'elite' have wasted $100 billion ignoring his best investment advice</a></strong></p>
<p><strong>DON'T MISS:&nbsp;<a href="http://www.businessinsider.com/ethers-value-volatility-investors-staying-put-2017-7" >Silicon Valley is hot on a new cryptocurrency that could become worth 100 times its current value</a></strong></p>
<p><a href="http://www.businessinsider.com/how-to-make-risky-investments-2017-7#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/bridgewater-ceo-ray-dalio-learning-from-mistakes-pain-reflection-progress-2017-5">Investing legend Ray Dalio shares the simple formula at the heart of his success</a></p> http://www.businessinsider.com/ethers-value-volatility-investors-staying-put-2017-7Silicon Valley is hot on a new cryptocurrency that could become worth 100 times its current valuehttp://www.businessinsider.com/ethers-value-volatility-investors-staying-put-2017-7
Wed, 12 Jul 2017 13:13:00 -0400Becky Peterson
<p><img style="float:right;" src="http://static6.businessinsider.com/image/59510bc6e92b942ca949bd20-2048/ddnjxl6uiaad9mp.jpg" alt="vitalik buterin ethereum" data-mce-source="Vitalik Buterin/Twitter" data-link="https://twitter.com/VitalikButerin/status/879127496024772610" /></p><p></p>
<p>Ether, the unit of cryptocurrency used on the Ethereum blockchain, has given investors a wild ride lately.</p>
<p>Its value more than doubled in May, peaked in June at more than $400 an ether, and then lost more than half that value by early this week.</p>
<p>That may sound like a bubble bursting. But some investors are still optimistic and are prepared to ride it out.</p>
<p>Aaron Batalion, a partner at Lightspeed Venture Partners, said he expected to see more 50% price jumps in ether, with big returns down the road.</p>
<p>"Over the next five to 10 years, I believe it will be worth 10 or 100 times its current value," Batalion said.</p>
<p>Jason Calacanis, an early investor in startups including Robinhood and Uber, recently tweeted: "I think I need to own some #Etherium -- what % of net worth would you allocate to crypto as a 46 year old with stable income?"</p>
<p>Chamath Palihapitiya, an early Facebook employee and <a href="https://twitter.com/chamath/status/883790139490578432">Silicon Valley investor, responded</a>: "1%."</p>
<p><img src="http://static3.businessinsider.com/image/59665de30976db382c8b47fe-750/screen shot 2017-07-12 at 13418 pm.png" alt="jason calacanis ethereum tweet" data-mce-source="Twitter/@Jason" data-link="https://twitter.com/Jason/status/883761410345279488" /></p>
<p>Matt Galligan, a serial entrepreneur and investor in ether, said he was also looking to the five-year mark, when he expects the platform to have matured to the point when it has a lot of uses.</p>
<p>"The space is still really early," Galligan said. "There's going to be a lot of froth and volatility."</p>
<h2><strong>What are Ethereum and ether?</strong></h2>
<p>Ethereum is a platform for sharing information that cannot be manipulated or changed. It's a blockchain similar to the one underlying the bitcoin cryptocurrency that records information chronologically and publicly.</p>
<p>In the future, Ethereum may be used to securely transfer money to your bank or to send documents to your insurance company. Today, these processes require multiple steps for verification and authentication, but Ethereum makes verification a one-step process because the information is incorruptible in the first place.</p>
<p>Ether is the unit of currency in Ethereum. It's a token that can be exchanged for services on the platform.</p>
<p>The currency is the "fuel for the Ethereum virtual machine," said Andreas Weiler, the head of markets at Smith and Crown, a crypto-financial research group.</p>
<h2><strong>Ether, Ethereum, and bitcoin are not the same things</strong></h2>
<p>While often compared to bitcoin, ether is not actually a competing currency. Bitcoin is explicitly a digital form of money and payment system, whereas ether is a means of buying services within Ethereum.</p>
<p>Ethereum is still in beta and not widely used, but some investors believe it may someday be a foundational layer of the internet. Ether is still a financial risk, however, because Ethereum hasn't yet taken off &mdash; and there's no guarantee that it will.</p>
<p>"When you invest in ether, you are not actually doing anything &mdash; you are holding ammo, which will allow you to execute code when there is code worth being executed on the platform," Weiler said.</p>
<p>In the meantime, though, you have to be prepared for a lot of volatility.</p>
<p>The price of ether shot up this spring, rising from less than $20 a digital coin in March to an all-time high of $420 in midday trading in the middle of June, according to Global Digital Asset Exchange, the primary Ether-trading platform. In May alone, it rose to nearly $230 an ether from less than $90.</p>
<p>In recent weeks, though, investors have been selling off the digital currency. It sank to as low as $175.56 earlier this week, according to GDAX, before rebounding. In recent trading on Wednesday, it was at $208.87.</p>
<p>Part of that instability comes from people not knowing what they're investing in, Weiler said.</p>
<p>"It really did smell like dumb money coming in and not knowing what Ethereum is about or what role ether plays in the economy in the first place," he said.</p>
<p>But the currency's price may stabilize as Ethereum scales and becomes more commonplace. It is this possibility that is keeping some investors in the game.</p>
<p>"As with any new technology innovation, the early attempts are fraught with challenges, but this technology will not go back into a box and disappear," Batalion said. "We will see meaningful companies built using this technology and fund-raising approach, even if the normal end user doesn't realize it's part of the foundation of a product [or] service they use."</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/ethereum-price-making-big-comeback-2017-7" >Ethereum is making a big comeback</a></strong></p>
<p><a href="http://www.businessinsider.com/ethers-value-volatility-investors-staying-put-2017-7#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/apple-iphone-addict-switches-google-pixel-2-android-phone-2017-11">I've been an iPhone user for 10 years — here's what happened when I switched to the Google Pixel 2 for a week</a></p> http://www.businessinsider.com/16b-hedge-fund-cio-explains-what-it-takes-to-work-at-a-hedge-fund-2017-6A $16B hedge fund CIO explains what it takes to work at a hedge fund todayhttp://www.businessinsider.com/16b-hedge-fund-cio-explains-what-it-takes-to-work-at-a-hedge-fund-2017-6
Sat, 17 Jun 2017 09:28:00 -0400Eames Yates and Rachael Levy
<p><a href="http://www.schonfeld.com/">Schonfeld Strategic Advisors'</a>&nbsp;chief investment officer, Ryan Tolkin, explains what kind of skill sets are the most valuable when it comes to working at a hedge fund. Following is a transcript of the video.&nbsp;</p>
<p><em>If you're thinking about getting a job at a hedge fund today, I think having strong statistical and analytical capabilities&nbsp;is probably the most important thing you can do.&nbsp;And then you need to figure out whether or not you have the technical capabilities&nbsp;that you want to be on the quantitative side of the business&nbsp;or on the discretionary side of the business, and I still think people on both sides can be successful.</em></p>
<p><em>Most of our quants have a computer-science background.&nbsp;They can code in either Python or C++.&nbsp;Whereas on the</em><br><em>discretionary side&nbsp;most of them come from a more traditional investment-banking background&nbsp;and are digging into 8-Ks and company fundamentals&nbsp;and being able to look at companies from a bottom-up perspective&nbsp;as compared to trying to use many different data sets to help predict the prices of stocks.&nbsp;Someone who's really analytical, someone who is competitive,&nbsp;someone who's hardworking,&nbsp;and, frankly, somebody who can challenge the people around them to work harder.</em><br>&nbsp;<br>&nbsp;</p><p><a href="http://www.businessinsider.com/16b-hedge-fund-cio-explains-what-it-takes-to-work-at-a-hedge-fund-2017-6#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/16b-hedge-fund-cio-explains-what-it-takes-to-work-at-a-hedge-fund-2017-6A $16B hedge fund CIO explains what it takes to work at a hedge fund todayhttp://www.businessinsider.com/16b-hedge-fund-cio-explains-what-it-takes-to-work-at-a-hedge-fund-2017-6
Tue, 13 Jun 2017 07:30:52 -0400Eames Yates and Rachael Levy
<p><a href="http://www.schonfeld.com/">Schonfeld Strategic Advisors'</a>&nbsp;chief investment officer, Ryan Tolkin, explains what kind of skill sets are the most valuable when it comes to working at a hedge fund. Following is a transcript of the video.&nbsp;</p>
<p><em>If you're thinking about getting a job at a hedge fund today, I think having strong statistical and analytical capabilities&nbsp;is probably the most important thing you can do.&nbsp;And then you need to figure out whether or not you have the technical capabilities&nbsp;that you want to be on the quantitative side of the business&nbsp;or on the discretionary side of the business, and I still think people on both sides can be successful.</em></p>
<p><em>Most of our quants have a computer-science background.&nbsp;They can code in either Python or C++.&nbsp;Whereas on the</em><br><em>discretionary side&nbsp;most of them come from a more traditional investment-banking background&nbsp;and are digging into 8-Ks and company fundamentals&nbsp;and being able to look at companies from a bottom-up perspective&nbsp;as compared to trying to use many different data sets to help predict the prices of stocks.&nbsp;Someone who's really analytical, someone who is competitive,&nbsp;someone who's hardworking,&nbsp;and, frankly, somebody who can challenge the people around them to work harder.</em><br>&nbsp;<br>&nbsp;</p><p><a href="http://www.businessinsider.com/16b-hedge-fund-cio-explains-what-it-takes-to-work-at-a-hedge-fund-2017-6#comments">Join the conversation about this story &#187;</a></p> http://markets.businessinsider.com/news/stocks/amazon-stock-price-bezos-share-sale-2017-5-1001984457Jeff Bezos just sold nearly $1 billion of Amazon stock (AMZN)http://markets.businessinsider.com/news/stocks/amazon-stock-price-bezos-share-sale-2017-5-1001984457
Fri, 05 May 2017 10:03:12 -0400Greg Hoffman
<p><img style="float:right;" src="http://static5.businessinsider.com/image/58fa35807522ca87088b535d-1300/jeff-bezos.jpg" alt="jeff bezos" data-mce-source="Brendan McDermid/Reuters"></p><p></p>
<p><a href="http://markets.businessinsider.com/stock/amzn-Quote">Amazon</a> CEO Jeff Bezos sold about $941 million of <a href="http://markets.businessinsider.com/stock/amzn-Quote">Amazon</a> stock in the last three days, the company said in a SEC&nbsp;<a href="https://www.sec.gov/Archives/edgar/data/1018724/000101872417000059/xslF345X03/wf-form4_149393258051666.xml" target="_self" title="https://www.sec.gov/Archives/edgar/data/1018724/000101872417000059/xslF345X03/wf-form4_149393258051666.xml">filing</a>.</p>
<p>It was part of a previously scheduled sale plan, but because Amazon's shares have run up sharply in the past year the sale is the biggest ever by the tech billionaire. Last year he sold $1.4 billion of Amazon stock in total.&nbsp;<br><br>The CEO sold about 1 million shares of Amazon this week. Bezos sold 1 million shares from Tuesday to Thursday ranging in price from about $935 to $950 per share, according to Thursday's filing. He still owns 79.9 million shares, or about 17 percent of the company, down from 83 million shares at the end of 2015.</p>
<p>Shares of the online retail behemoth are up 42% in the last year and up 25% this year alone.</p>
<p>Bezos has promised to use some of his Amazon profits to fund his space exploration company <a href="http://www.cnbc.com/2017/05/04/jeff-bezos-sells-940-million-in-amazon-stock.html">Blue Origin, CNBC's Matt Rosoff reported.</a></p>
<p><a href="http://markets.businessinsider.com/news/stocks/amazon-ceo-jeff-bezos-worlds-richest-person-amazon-stock-price-2017-4-1001962118-1001962118">Bezos is on his way to becoming the worlds richest person </a>as Amazon stock approaches the $1000 mark.</p>
<p><a href="http://markets.businessinsider.com/stock/amzn-Quote">Click here for a real time Amazon chart.</a></p>
<p><img src="http://static1.businessinsider.com/image/590c813952b5d860008b488f-940/screen shot 2017-05-05 at 94153 am.png" alt="Screen Shot 2017 05 05 at 9.41.53 AM" data-mce-source="Markets Insider"></p><p><a href="http://markets.businessinsider.com/news/stocks/amazon-stock-price-bezos-share-sale-2017-5-1001984457#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/financial-system-could-collapse-at-any-moment-2017-11">One market expert says the financial system could collapse at any moment</a></p> http://www.businessinsider.com/what-millionaire-entrepreneurs-invest-in-2017-411 millionaire entrepreneurs share the best investment they ever madehttp://www.businessinsider.com/what-millionaire-entrepreneurs-invest-in-2017-4
Wed, 26 Apr 2017 13:55:00 -0400The Oracles
<p><span><img src="http://static6.businessinsider.com/image/5900d5600ba0b896008b65aa-1939/james swanwick.png" alt="James Swanwick" data-mce-source="The Oracles">Money, time, vision, sacrifice: Investment takes many forms for entrepreneurs. Here's how 11 millionaire (and billionaire) members of </span><a href="http://www.theoracles.com/">The Oracles</a><span> did it right.</span></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/things-i-learned-about-rich-people-2017-4" >10 things I learned about rich people while helping millionaires manage their money</a></strong></p>
<h3>Branding</h3>
<img src="http://static5.businessinsider.com/image/5900d4fb0ba0b8ac008b65bc-400-300/branding.jpg" alt="" />
<p><p><span>If you can afford to, invest in branding. Think of branding as getting married and selling as hooking up. It's why I&rsquo;m winning; I&rsquo;m branding while everyone is selling. Even the little things I sell &mdash; like shirts or a $13 book every three years &mdash; is branding. I don't care about the money; my economics just reinforce long-term branding and awareness. The quickest way I know somebody doesn't think they&rsquo;re big time is by their short-term behavior. </span></p>
<p><strong><em>&mdash;&nbsp;</em></strong><a href="https://www.garyvaynerchuk.com/first-time-here/"><strong><em>Gary Vaynerchuk</em></strong></a><strong><em>, founder and CEO of </em></strong><a href="http://www.vaynermedia.com/"><strong><em>VaynerMedia</em></strong></a><strong><em> (700+ employees with more than $100 million in annual revenue) and the NYT-bestselling author of "</em></strong><strong><em><a href="https://www.amazon.com/AskGaryVee-Entrepreneurs-Leadership-Social-Self-Awareness/dp/0062273124">#AskGaryVee</a>"</em></strong></p></p>
<br/><br/><h3>Investing in tech</h3>
<img src="http://static5.businessinsider.com/image/5900d5120ba0b8db158b63a6-400-300/investing-in-tech.jpg" alt="" />
<p><p><span>Hotmail was a turning point for me. I came up with the idea for viral marketing so that Hotmail could be spread from customer to customer like a virus. All of a sudden, one of the companies I'd seeded was a household name. It made fundraising easier, and more entrepreneurs wanted my backing and advice. Hotmail affected an extraordinary number of people: Approximately 3 billion people communicate through the internet for free, largely due to Hotmail. </span></p>
<p><strong><em>&mdash;&nbsp;</em></strong><a href="http://www.timothydraper.com/"><strong><em>Tim Draper</em></strong></a><strong><em>, founding partner of VC firm </em></strong><a href="http://dfj.com/"><strong><em>DFJ</em></strong></a></p></p>
<br/><br/><h3>Seeding passionate entrepreneurs</h3>
<img src="http://static2.businessinsider.com/image/5900d5230ba0b896008b65a5-400-300/seeding-passionate-entrepreneurs.jpg" alt="" />
<p><p><span>The fastest money I ever made was investing in a young technology startup before I sold my brokerage business. I didn't even understand what the guy actually did, but he was hard up for money, and I believed he would find a way to succeed. I bought 10 percent of his business for $100,000 and forgot about it until he bought it back from me for $1 million five years later. I used that million dollars to invest in my first 15 businesses on "Shark Tank." </span></p>
<p><strong><em>&mdash;&nbsp;</em></strong><a href="http://www.barbaracorcoran.com/about/"><strong><em>Barbara Corcoran</em></strong></a><strong><em>, founder of The Corcoran Group and Shark on "</em></strong><a href="http://abc.go.com/shows/shark-tank"><strong><em>Shark Tank</em></strong></a><strong>"</strong></p></p>
<br/><br/><a href="http://www.businessinsider.com/what-millionaire-entrepreneurs-invest-in-2017-4#/#hiring-a-legend-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/ric-edelman-why-annuities-are-a-raw-deal-2017-4A top financial adviser explains why he thinks annuities are a raw dealhttp://www.businessinsider.com/ric-edelman-why-annuities-are-a-raw-deal-2017-4
Fri, 21 Apr 2017 16:35:00 -0400Tanza Loudenback
<p><img style="float:right;" src="http://static1.businessinsider.com/image/58fa514b7522ca26008b55a3-1041/undefined" alt="Always be closing" data-mce-source="New Line Cinema/Netflix"></p><p>With more than 30 years of experience in the financial industry, Ric Edelman has heard and seen it all, and there's one topic he's sick of: annuities.</p>
<p>"Annuity products are a very common sales pitch because they generate big commissions for the guys who sell them to you, but they're not in your best interest at all," said Edelman, founder and executive chairman of <a href="http://www.edelmanfinancial.com/">Edelman Financial Services</a>, one of the nation's leading financial advising firms, and author of the new book "<a href="https://www.amazon.com/Truth-About-Your-Future-Money/dp/1501163809/ref=asap_bc?ie=UTF8&amp;tag=bisafetynet-20">The Truth About Your Future: The Money Guide You Need Now, Later, and Much Later</a>."</p>
<p><a href="http://money.usnews.com/money/blogs/the-best-life/2008/12/12/15-things-you-need-to-know-now-about-annuities">Annuities</a> are detailed and varied, but they're basically a type of retirement fund held at an insurance company. You build up the fund either through small payments over a long period of time or as a lump sum. That money is invested and grows tax-deferred until you want to start receiving regular payouts of a set amount, at which point investment gains are taxed as income.</p>
<p>"[Marketers] promise that you're not going to lose any money, there's no stock market risk, and they guarantee income for life — sounds pretty good, what's not to love? Well, there are a couple of things not to love," Edelman told Business Insider in <a href="https://www.facebook.com/pg/BusinessInsider.Careers/videos/">a recent Facebook Live</a> interview.</p>
<p>Insurers make money from high management fees on your annuities. And as they invest your money, they're able to keep any money beyond the established payments you're set to receive. In other words, annuities seem safe and reliable because you'll never end up with less than your principal investment.</p>
<p>But Edelman explains a few reasons why you should still be wary of annuities:</p>
<p style="padding-left: 30px;">"No. 1, the interest rate is so low, it's not going to compound your growth sufficiently for you to be able to achieve the goals that you have.</p>
<p style="padding-left: 30px;">"No. 2, the income that they promise you is dependent on the insurance company's ability to pay it. If that insurance company goes broke, your annuity goes broke.</p>
<p style="padding-left: 30px;">"Third, taxes. You're paying taxes at a maximum level. If you take the money prior to 59 and a half, you're not only paying taxes, you're also paying a 10% IRS penalty."</p>
<p>Bottom line: As with any other financial decision, be sure you understand the scope of your investment before getting into it.</p>
<p><strong>Watch Business Insider's full interview with Ric Edelman below:</strong></p>
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</div><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/ric-edelman-why-your-career-path-is-no-longer-about-a-college-degree-2017-4" >Top financial adviser: The fate of your career is 'no longer about a college degree'</a></strong></p>
<p><strong>DON'T MISS:&nbsp;<a href="http://www.businessinsider.com/ric-edelman-explains-why-saving-for-the-future-will-be-easy-2017-4" >In the near future, we'll live to age 120 and need way more money — and it'll be easy, if you follow Warren Buffett's lead</a></strong></p>
<p><a href="http://www.businessinsider.com/ric-edelman-why-annuities-are-a-raw-deal-2017-4#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/money-save-invest-401k-millionaire-2016-12">How much money you need to save each day to become a millionaire by age 65</a></p> http://www.businessinsider.com/8-time-nba-all-star-kevin-durant-on-the-best-money-decision-he-ever-made-2017-38-time NBA All Star Kevin Durant on the best money decision he ever madehttp://www.businessinsider.com/8-time-nba-all-star-kevin-durant-on-the-best-money-decision-he-ever-made-2017-3
Thu, 23 Mar 2017 16:10:00 -0400Jennifer Barrett
<p><img style="float:right;" src="http://static2.businessinsider.com/image/58d3f3a5112f70e0018b65df-2068/undefined" alt="kevin durant" data-mce-source="Jamie McCarthy/Getty Images"></p><p>You know #35 as a former Rookie of the Year, MVP and eight-time NBA All-Star. But Kevin Durant's success reaches far beyond the basketball court.</p>
<p>In addition to earning big bucks from his endorsement deals — it's reported he'll make <a href="https://www.forbes.com/sites/kurtbadenhausen/2017/02/19/the-nba-all-stars-2017-players-that-earn-the-most-money-from-endorsements/#2090f4c978f6" target="_blank" onclick="__gaTracker('send', 'event', 'outbound-article', 'https://www.forbes.com/sites/kurtbadenhausen/2017/02/19/the-nba-all-stars-2017-players-that-earn-the-most-money-from-endorsements/#2090f4c978f6', '$36 million');">$36 million</a> this year<em> off</em> the court, thanks to his partnerships with Nike and others — his startup, The Durant Company, has <a href="http://kevindurant.com/partners" target="_blank" onclick="__gaTracker('send', 'event', 'outbound-article', 'http://kevindurant.com/partners', 'invested in companies');">invested in companies</a> like Postmates, Jetsmarter and, as of last fall, Acorns.</p>
<p>As if that's not enough to keep him busy, he also has a nonprofit, <a href="http://kevindurant.com/foundation" target="_blank">Kevin Durant Charity Foundation</a>, which works to improve the lives of low-income kids through education and sports.</p>
<p>We spoke with the Golden State Warrior — who's recovering from a sprain in his left knee and is expected to return before the end of the season — about his childhood, the best money decision he's made and why there's no such thing as a slam-dunk investment.</p>
<p><strong>You've talked a lot about the sacrifices your mom made for you and your brother, growing up. How has she influenced your approach to your life and career?</strong></p>
<p>Hard work! Plain and simple. It was so clear to me at a young age that if you didn't get up every day and work 'til it was dark, you weren't eating. So working hard and never cutting corners wasn't even a question for me because we were starving.</p>
<p>I'll never forget seeing my mom before the sun came up leaving the house on a few hours sleep, over and over and over again.</p>
<p><strong>How did watching your mom struggle to support you both while working two jobs affect your own relationship with money?</strong></p>
<p>To this day, I still can't believe the luxuries this game has afforded me. It's almost embarrassing at times, but I understand it's the market for my profession. I appreciate every moment and how lucky I am.</p>
<p>Knowing how just a short time ago I had nothing has really been the leading motivation for me to have the right people work with me and help me manage my money. I want my kids and their kids to benefit from this time in my life and not ever have to go through what I went through.</p>
<p>I'm also very driven to be as philanthropic as I can be. I don't think I could enjoy my success without knowing I was doing all I could do to help others.</p>
<p><strong>What's the best financial decision you've made so far — and why?</strong></p>
<p>Having the right people around me who I trust. And trusting my instincts and asking questions. You can't learn and grow without leaning on others.</p>
<p><strong>What's the biggest financial lesson you've learned?</strong></p>
<p>Nothing is a can't-miss way to make money. There's always a catch … Do your homework before investing or supporting a business or an idea. And save! Always keep building your savings because nothing in life is guaranteed.</p>
<p>Ask more questions and trust yourself — just as I said before. But young Kevin had to learn those lessons for me to be who I am today and to be surrounded by the people I am with today.</p>
<p><strong>What do you hope to accomplish through your namesake charity foundation?</strong></p>
<p>To help as many underserved communities and children, especially through education, athletics and opportunity. It's my real life's work.</p>
<p><strong>You own a stake in The Players' Tribune, Tiger Beat, Postmates — and Acorns. What do you look for in the investments you pursue?</strong></p>
<p>Things I connect to and believe in — and great executive teams. The <a href="https://grow.acorns.com/2016/01/ashton-kutcher-on-the-best-investments-you-can-make-in-2016/" target="_blank">people I'm investing in</a> is really the first indicator of whether it's something I want to be a part of.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/smart-money-tips-you-can-learn-from-professional-athletes-2016-9/#-7" >7 smart money tips you can learn from professional athletes</a></strong></p>
<p><a href="http://www.businessinsider.com/8-time-nba-all-star-kevin-durant-on-the-best-money-decision-he-ever-made-2017-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/navy-seal-explains-tips-attacked-by-dog-2017-6">A Navy SEAL explains what to do if you're attacked by a dog</a></p> http://www.businessinsider.com/a-financial-planner-explains-how-to-avoid-making-a-bad-investment-2016-11A financial planner explains how to avoid making a bad investment http://www.businessinsider.com/a-financial-planner-explains-how-to-avoid-making-a-bad-investment-2016-11
Tue, 29 Nov 2016 13:15:00 -0500Tanza Loudenback
<p><img style="float:right;" src="http://static2.businessinsider.com/image/58360f7b8fe4de36331a83f1-1200-924/woman-looking-at-house-2.jpg" border="0" alt="woman looking at house"></p><p>Our friends and family are our greatest confidants. They listen to us, comfort us, and frequently offer up advice — warranted and unwarranted.</p>
<p>But there's one type of advice you shouldn't heed — whether it's coming from your best friend, your coworker, or even your mom — and that's investment advice, says Katie Brewer, a Dallas-based CFP and founder of <a href="http://yrlplanning.com/">Your Richest Life</a>.</p>
<p>Brewer says that just because something has been a good investment for someone else, doesn't mean it will be fruitful for you too,&nbsp;<span>even if you share similar interests or a similar financial situation. Likewise, it's never smart to take investment advice from someone who hasn't even made an investment themselves.</span></p>
<p>"I always feel like, generally, if your best friend that has no experience investing told you that something is a great investment ... it just means you need to do your own independent research and not take at face value that it's a good investment," Brewer told Business Insider.</p>
<p>As always, if you have preconceived notions of an industry or company, or even a first-hand account from a friend who has previous experience investing in that realm, you would be wise to <a href="http://www.businessinsider.com/warren-buffett-investing-rules-2015-6"><span class="s1">complete your due diligence</span></a>.</p>
<p class="p1">Brewer offered an example:</p>
<p class="p1" style="padding-left: 30px;">I have somebody that came to me and said 'I have all these people I know that are doing real-estate investing and I think I should be doing it.' And I asked, 'Well who is it that's doing the real estate investing?' She mentioned to me that it's somebody who is already in commercial real estate, that is their career. So their day job is doing commercial real estate and then they snatch up some good deals as they're doing it for their personal portfolio.</p>
<p class="p1" style="padding-left: 30px;">I asked, 'What's your personal experience with real estate?'</p>
<p class="p1" style="padding-left: 30px;">'I don't have any, I live in a house and that's about it.'</p>
<p class="p1" style="padding-left: 30px;">'Well do you want to do this, do you want to be a landlord, do you want to pay to have a property management association?'</p>
<p class="p1" style="padding-left: 30px;">'No, that sounds like a pain in the butt.'</p>
<p class="p1" style="padding-left: 30px;">I told her, 'This is something that might make sense for that particular person because it's an area they feel comfortable with, they're picking up good deals as part of their work, but it doesn't make sense for you.'</p>
<p class="p1">Ultimately, Brewer said, "If your coworker says they’re doing X, Y, Z, if your best friend says they’re doing X, Y, Z, if your mom says they’re doing X, Y, Z, just make sure you actually look at it from a perspective of ‘Is this a good investment? Have I done the research on it? And does this actually make sense in my personal financial plan?'"</p>
<p class="p1">So, the age-old question stands: If everybody was jumping off a bridge, would you jump too? "You don't have to do [it] just because friends and family are saying it's a good investment," Brewer says.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/quicken-ceo-danger-of-following-hot-investing-tip-2016-11" >The biggest mistake this CEO ever made with his own money illustrates the danger of following a hot investing tip</a></strong></p>
<p><strong>DON'T MISS:&nbsp;<a href="http://www.businessinsider.com/what-to-do-with-savings-2016-11" >Here's how you should be investing if you're sitting on a lot of cash, but the stock market scares you</a></strong></p>
<p><a href="http://www.businessinsider.com/a-financial-planner-explains-how-to-avoid-making-a-bad-investment-2016-11#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/self-made-millionaires-common-personality-trait-2017-11">Self-made millionaires all have common personality traits that helped build their wealth</a></p> http://www.businessinsider.com/these-are-the-most-important-investing-rules-you-should-know-2016-11These are the most important investing rules you should knowhttp://www.businessinsider.com/these-are-the-most-important-investing-rules-you-should-know-2016-11
Fri, 18 Nov 2016 20:08:00 -0500Selena Maranjian
<p><span><img style="float:right;" src="http://static1.businessinsider.com/image/582f6fc4e02ba72a008b55fa-711/2016-06-25t081231z_4_lynxnpec5n1wg_rtroptp_3_britain-eu-stocks.jpg" alt="2016 06 25T081231Z_4_LYNXNPEC5N1WG_RTROPTP_3_BRITAIN EU STOCKS.JPG" data-mce-source="REUTERS/Lucas Jackson" data-mce-caption="Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 24, 2016" data-link="http://mediaexpress.reuters.com/all?id=tag%3Areuters.com%2C2016%3Anewsml_KCN0ZA3JH%3A4&amp;search=all%3Abrexit%20markets" /></span></p>
<p><span>So you want to invest -- or perhaps you're already investing. </span></p>
<p><span>That's great! After all, relatively few of us have pensions to look forward to in retirement, so it's more on us than ever to sock money away for the future and grow a meaningful nest egg. </span></p>
<p><span>As you invest, here are 10 rules you should know by heart.</span></p>
<h2><span>Have a long-term view</span></h2>
<p>First off, plan to be patient and avoid short-term thinking and trading.</p>
<p>No one can really know what the market will do in any given day or even any given year, so it's generally not productive to act on guesses. Furthermore, if you buy into some great and growing companies at good prices, don't let yourself get impatient if they don't perform as expected quickly. Even great companies can go through occasional downturns or periods of stagnation.</p>
<h2><span>Don't act on emotions</span></h2>
<p>Investment results can really suffer if we're led by fear or greed. Too often, people jump into stocks that have surged beyond reasonable values as they don't want to be left out -- only to lose ground when the stocks retreat. And when the market or a solid company's stock takes a dive, it's a mistake to bail out, as you don't know when the rebound will happen.</p>
<h2><span>Remember you're buying companies</span></h2>
<p>It's important to not think of stocks as bits of electronic magic that grow and shrink over time. Instead, understand that they represent pieces of actual companies, entitling you to share in those companies' successes and failures. Thus, for best results, get to know the companies you invest in very well, acquainting yourself with exactly how they make their money, what their growth potential is, how financially healthy they are, how talented and candid their managements are, and what risks and challenges they face.</p>
<h2>&nbsp;</h2>
<h2><span><img src="http://static4.businessinsider.com/image/55d6878e9dd7cc1e008b4e01-2400/rtx1oy6w.jpg" alt="stock traders" data-mce-source="REUTERS/Brendan McDermid" data-mce-caption="Traders work on the floor of the New York Stock Exchange August 20, 2015." /></span></h2>
<h2><span>Focus on fees</span></h2>
<p>Whether you're buying shares of companies through a brokerage or investing in mutual funds on your own or through a retirement account, pay attention to the fees you're paying. Consider this example: Imagine mutual funds A and B, which respectively sport expense ratios (annual fees) of 0.7% and 1.7% and that you park $5,000 in each of them annually for 20 years. If they each grow at an annual average rate of 10%, you'll end up with $289,000 in fund A but only $256,000 in fund B. That single percentage point cost you $33,000.</p>
<h2><span>Diversify</span></h2>
<p>You probably know that you shouldn't keep all your eggs in one basket -- and that the maxim applies to investments, too. If you're not paying attention, though, you may overload your portfolio with stocks in a certain niche that has you excited, whether it's solar energy or 3-D printing or Chinese stocks. That can lead to trouble if that niche or sector tanks. Try to diversify across industries and to include some non-U.S. investments, too.</p>
<h2><span>Expect to lose money</span></h2>
<p>It can sting when you lose money in the stock market, but it's not a sign of failure. Even the best investors have made regrettable moves. Warren Buffett, for example, apologized in his 1998 letter to shareholders, saying: "[M[y decision to sell&nbsp;<span>McDonald's</span>&nbsp;was a very big mistake. Overall, you would have been better off last year if I had regularly snuck off to the movies during market hours." Expect to lose some money in stocks now and then. As you learn more and start making fewer mistakes, you will likely lose less money, too.</p>
<h2><span>Have a margin of safety</span></h2>
<p>As you buy stocks, aim to have a margin of safety -- by buying them for less than you think they're worth. Undervalued stocks are likely to eventually grow into their intrinsic value, while overvalued stocks may decline, at least for a while. Looking for price-to-earnings (P/E) ratios below the companies' five-year averages is a start.</p>
<p><img src="http://static2.businessinsider.com/image/553b2ec7ecad042319439041-2400/rtx126ea.jpg" alt="New York Stock Exchange" data-mce-source="REUTERS/Lucas Jackson" data-mce-caption="A trader works on the floor of the New York Stock Exchange shortly before the end of the day's trading in New York." /></p>
<h2><span>Boring investments are OK</span></h2>
<p>Don't think that you have to uncover some obscure high-flying stocks to make money. Companies that are huge and well known can still reward you handsomely over time.</p>
<p><span>The industries these companies toil in don't excite many people -- garbage collection, retail, railroads, footwear -- still can perform well. Note that General Electric underperformed the S&amp;P 500 over the past 10 years. That's a reminder that good companies can do so. Apple&nbsp;</span><em>is&nbsp;</em><span>kind of exciting, but it's also far from obscure, as it currently sports the largest market value of all companies.</span></p>
<h2><span>Assess your performance&nbsp;</span></h2>
<p>As you invest, be sure to assess your performance every now and then, to make sure that you're outperforming relevant benchmarks. For example, if you're not outperforming the S&amp;P 500 over a bunch of years, you would do well to just invest in an S&amp;P 500 index fund instead. It will save you a lot of trouble and still deliver growth. Even Warren Buffett recommends index funds for most investors.</p>
<h2><span>Keep learning</span></h2>
<p>Finally, for best results, keep reading about and learning about investing. The more you know the more money you'll likely make. Learning more -- and learning from others' mistakes -- can help you avoid common pitfalls such as penny stocks, day-trading, and chasing high-flyers.</p><p><a href="http://www.businessinsider.com/these-are-the-most-important-investing-rules-you-should-know-2016-11#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/eyelid-surgery-in-south-korea-2015-11">Why Korean parents are having their kids get plastic surgery before college</a></p> http://www.businessinsider.com/when-an-investment-adviser-isnt-a-waste-of-money-2016-116 times an investment adviser isn't a waste of money, according to a financial plannerhttp://www.businessinsider.com/when-an-investment-adviser-isnt-a-waste-of-money-2016-11
Wed, 16 Nov 2016 12:23:00 -0500Matt Becker
<p><img style="float:right;" src="http://static4.businessinsider.com/image/582c8a4aba6eb6b1018b4965-1440/15421419053_5cdee1f100_o.jpg" alt="coworker meeting" data-mce-source="Sebastiaan ter Burg/Flickr" data-link="https://www.flickr.com/photos/ter-burg/15421419053/in/album-72157649375763027/" /></p><p>Last week I talked about <a href="https://momanddadmoney.com/easy-investing">how easy it is to invest in a way that's likely to outperform just about everyone else, including the professionals</a>.</p>
<p>The tools available to you these days are so good, no matter how much money you have to invest, that it doesn't make sense to pay a professional for help if all they're going to do is watch your portfolio and <a href="https://momanddadmoney.com/rebalancing-investments/">rebalance it</a> every now and then.</p>
<p>You can get that exact same service from a computer for a fraction of the cost.</p>
<p>But that doesn't mean you have to do it completely on your own. There <em>are</em> good reasons to pay for investment advice, and even some potential reasons to have someone manage your investments for you.</p>
<p>The key is understanding what's worth paying for and what isn't.</p>
<h2>What ISN'T worth paying for</h2>
<p><a href="https://momanddadmoney.com/the-experts-cant-pick-stocks-can-you/">The numbers don't lie</a>: no matter how convincing their argument is, the odds of any investment professional outperforming the market over any extended period of time are almost non-existent.</p>
<p>It's counterintuitive, but it's true. Unless you're investing with Warren Buffett, you just aren't going to find someone who can produce better investment returns than you'd get from <a href="https://momanddadmoney.com/index-investing">using simple, low-cost index funds</a>.</p>
<p>So thing #1, you shouldn't pay for is an investment professional who claims that he or she will beat the market. You'll almost certainly get worse returns and pay a hefty price for the privilege.</p>
<p>Thing #2, you shouldn't pay for is a professional who simply buys index funds, holds onto them, and rebalances for you every once in a while.</p>
<p>That's not to say that someone who does that can't be valuable (they absolutely can). It's just&nbsp;that they need to do <em>more</em> than that in order to be truly valuable, because <a href="https://momanddadmoney.com/easy-investing">there are plenty of ways for you to do that on your own with minimal effort</a>.</p>
<p>So, what <em>is</em> worth paying for?</p>
<p>Here are 6 good reasons to pay for professional investment advice</p>
<h2>1. Creating the initial plan</h2>
<p>While it's easier than ever to access&nbsp;top-notch investment portfolios, creating your overall <em>investment plan</em> can still be overwhelming. There are so many different options available that it can be hard to even know what questions to ask, let alone where to start.</p>
<p>And that's the first place a good investment advisor can be really helpful.</p>
<p>A good advisor will listen to your goals, learn about your current financial situation, and help you create a plan that lays out&nbsp;exactly:</p>
<ol>
<li>How much to save</li>
<li>Which accounts to use</li>
<li>Which investments to choose in each account</li>
</ol>
<p>That's the foundation of a good investment plan, and with that in hand you can use some of <a href="https://momanddadmoney.com/easy-investing">the tools we talked about last week</a> to put it in place.</p>
<p>This kind of relationship is great because you can pay a one-time fee for the advice and reap the benefits for years to come.</p>
<p>It's a limited cost for a lifetime of value.</p>
<h2>2. Behavioral coaching</h2>
<p>A few years ago Vanguard released a report that quantified the value-add of a good advisor in terms of increased annual investment return. You can read the report <a href="https://advisors.vanguard.com/iwe/pdf/ISGQVAA.pdf" target="_blank">here</a>.</p>
<p>According to them, by far the most valuable service an investment advisor can provide is behavioral coaching. As they write:</p>
<p style="padding-left: 60px;"><em>Because investing evokes emotion, advisors need to help their clients maintain a long-term perspective and a disciplined approach&hellip;. Most investors are aware of these time-tested principles, but the hard part of investing is sticking to them in the best and worst of times&hellip;. Abandoning a planned investment strategy can be costly, and research has shown that some of the most significant derailers are behavioral: the allure of market-timing and the temptation to chase performance.</em></p>
<p>In other words, the best investors are the ones who stick to their plan through the highs and the lows. They avoid getting over-aggressive when the market is high, and they avoid selling out when the market is low.</p>
<p>And even when we have the best intentions, we're not always good at maintaining&nbsp;a long-term view when everyone around us is freaking out. But a good investment advisor can lay the groundwork for consistency at the beginning of your relationship AND coach you through the turbulent times to help you stick to your plan.</p>
<p>According to Vanguard, that kind of coaching&nbsp;can increase your investment returns by&nbsp;up to 1.5% annually, which means it may&nbsp;be worth paying for all on it's own.</p>
<h2>3. Tax optimization</h2>
<p>If all of your money is in <a href="https://momanddadmoney.com/how-to-choose-the-right-investment-account/">tax-advantaged accounts</a> like 401(k)s, IRAs, and health savings accounts, then this one isn't relevant to you.</p>
<p>But if you have a significant amount of money in taxable investment accounts, there's potentially a lot to gain from <a href="https://www.bogleheads.org/wiki/Tax-efficient_fund_placement" target="_blank">putting the right investments in the right accounts</a> in order to minimize your tax cost and therefore maximize your gains.</p>
<p>For example, stocks are generally <em>tax-efficient</em> because for the most part you don't recognize gains until you sell, and even then they're usually <a href="http://www.moneychimp.com/features/capgain.htm" target="_blank">taxed at a lower rate</a>. Which means that you can defer gains for years at a time, even in a taxable account. (They do pay dividends each year, which are taxed, but even those are generally subject to <a href="https://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Guide-to-Taxes-on-Dividends/INF19201.html" target="_blank">lower tax rates</a>.)</p>
<p>On the other hand, bonds pay out most of their gains as interest each year that's taxed as ordinary income, which in general makes them <em>tax-inefficient</em>.</p>
<p>So as a general rule of thumb, you would prefer to fill up your taxable investment account with stocks and leave your bonds for your tax-advantaged accounts.</p>
<p>Now, that's an oversimplified way of looking at it, but a good investment advisor will understand which accounts are available to you, what your tax situation is, and how to place the right investments in the right accounts in order to minimize your tax bill.</p>
<p>According to Vanguard, that expertise&nbsp;can add as much as 0.75% annually to your investment returns, but again, that depends a lot on the specifics of your situation.</p>
<h2>4. Special interest investing</h2>
<p>Some people like to invest for more than money. For example, there's a big trend towards <a href="http://www.thesimpledollar.com/socially-responsible-investing-add-meaning-to-your-money/" target="_blank">socially responsible investing</a>, which essentially means that you incorporate your personal values into your investment plan.</p>
<p>As an example, if you're a proponent of sustainable energy, you may choose&nbsp;to exclusively invest in companies that you believe are pushing sustainable energy forward. Or you may simply decide NOT to invest in oil and gas companies.</p>
<p>Whatever it is, if you want to take something other than a market-based approach to investing, you may benefit from working with a professional who has similar values and can devote all of his or her time to finding the best investment opportunities in your chosen space.</p>
<p>On the flip side, this is also an area that's ripe for deception. It's very easy for someone&nbsp;to say that they&nbsp;specialize in a certain type of investing without really having any relevant experience or expertise.</p>
<p>So if you want to go this route, ask a lot of questions and make sure any professional you work with is both truly an expert and has your best interests in mind.</p>
<h2>5. Withdrawal strategies in retirement</h2>
<p>One of the trickiest parts of investing is knowing how to spend all the money you've accumulated once you retire.</p>
<p>This isn't something I specialize in, so I actually have a lot to learn here myself. But basically this has to do with taking the right amount of money out of the right accounts at the right times, based on both your personal needs and market conditions.</p>
<p>The more accounts you have, and especially if you have multiple accounts that tax withdrawals differently, the trickier this gets. According to Vanguard, good advice on this front can increase your returns by up to 0.70% annually.</p>
<h2>6. You know you won't do it on your own</h2>
<p>The surest path to investment success is simply making sure that you do it.</p>
<p>For the first 10 years or so, <a href="https://momanddadmoney.com/savings-rate/">it's your savings rate that matters more than anything else</a>. As long as you're saving the right amount of money, the actual investment strategy doesn't matter all that much.</p>
<p>Then, once you've accumulated a decent amount of savings, the strategy itself becomes much more important. Because at that point the returns you earn, good or bad, will add up to a significant amount and you want to make sure you're doing it right.</p>
<p>Both of those things can be done on your own. You can certainly save on your own, and as we learned&nbsp;last week <a href="https://momanddadmoney.com/easy-investing">you can also manage your investments with ease</a>.</p>
<p>BUT being able to do it and actually doing it are two very different things.</p>
<p>If you know that you won't stay on top of this stuff on your own, it may be worth paying someone to do it for you. It will cost more than the DIY route, but it will be a lot more effective than not doing it at all.</p>
<h2>Know what you're paying for</h2>
<p>The main point here is that you shouldn't assume that it's worth paying an investment professional. There are many cases where the cost will outweigh the benefits, especially when compared to the fantastic investment tools you have access to these days.</p>
<p>But there <em>are</em> situations in which getting&nbsp;professional advice is worthwhile, IF you know exactly what you're paying for and what you're getting.</p>
<p>Oh, and as for finding an investment advisor who both has the expertise and has your best interests in mind, I would start here: <a href="https://momanddadmoney.com/how-to-find-the-right-financial-planner-for-you/">How to Find the Right Financial Planner for YOU</a>.</p><p><strong>DON'T MISS:&nbsp;<a href="http://www.businessinsider.com/quicken-ceo-danger-of-following-hot-investing-tip-2016-11" >The biggest mistake this CEO ever made with his own money illustrates the danger of following a hot investing tip</a></strong></p>
<p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/paying-for-a-financial-adviser-worth-it-2016-10" >A financial adviser explains what everyone gets wrong about paying for money advice — and why it's worth it in the long run</a></strong></p>
<p><a href="http://www.businessinsider.com/when-an-investment-adviser-isnt-a-waste-of-money-2016-11#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/how-to-get-cheaper-flights-other-airline-secrets-2017-10">6 airline industry secrets that will help you fly like a pro</a></p> http://www.businessinsider.com/fundersclub-launches-fcvc-institutional-arm-2016-9This company is trying to reinvent venture capital for the millennial erahttp://www.businessinsider.com/fundersclub-launches-fcvc-institutional-arm-2016-9
Fri, 02 Sep 2016 14:04:23 -0400Matt Weinberger
<p><img style="float:right;" src="http://static4.businessinsider.com/image/57c9b553b996eb0e228b5ca4-1280/nvbnaqpnqaqt8u9is4qm_fundersclub_1.jpg" alt="fundersclub founders" data-mce-source="FundersClub" data-mce-caption="FundersClub founders Alex Mittal and Boris Silver" /></p><p>Ask any startup founder: The process of securing cash for a new startup is a harrowing, time-consuming process that can involve <a href="http://www.businessinsider.com/canva-ceo-melanie-perkins-interview-2016-8">meeting dozens upon dozens of potential investors</a>, with no guarantee of success.</p>
<p>It's a huge distraction from actually running a company, <a href="http://www.businessinsider.com/hustle-con-presentations-on-startups-from-nerdwallet-teespring-general-assembly-thirdlove-2015-4">during the days where your involvement is most needed</a>.</p>
<p>This is a problem that Alex Mittal and Boris Silver are very well acquainted with, as former startup founders themselves.</p>
<p>"It's a very repetitive, inefficient process," Mittal says.</p>
<p>That's why, four years ago, they started <a href="http://www.fundersclub.com">FundersClub </a>&mdash; what they see as a better, more humane way for startups and investors to find each other, taking advantage of very Silicon Valley ideas like network effects, crowdsourcing, and the power of the web.</p>
<p>"Software is eating the world; FundersClub is eating venture capital," Mittal says.</p>
<p>FundersClub has been called the "Kickstarter for Venture Capital." Using FundersClub, would-be financiers all over the world can get in on the high-risk, high-reward world of Silicon Valley startup investing, even if they're not part of the traditional "<a href="http://www.businessinsider.com/ellen-pao-trial-closing-arguments-2015-3">old boys club</a>" of the venture capital scene.</p>
<p><img src="http://static4.businessinsider.com/image/57c9b610b996eb1c008b5e91-1821/fundersclub exits.png" alt="fundersclub exits" data-mce-source="A selection of successful sales for FundersClub-backed companies." /></p>
<p>Now, FundersClub has just shy of 18,000 members &mdash; individual investors from all over the world &mdash; who have made 247 early-stage investments in 195 companies. That includes Silicon Valley high-flyers like <a href="http://www.businessinsider.com/slack-ceo-stewart-butterfield-and-box-ceo-aaron-levie-bots-making-work-more-efficient-2016-8">Slack </a>and <a href="http://www.businessinsider.com/instacart-is-profitable-but-only-under-these-circumstances-2016-3">Instacart</a>. It looks like FundersClub is working as intended.</p>
<p>Top Silicon Valley firms like Andreessen Horowitz, Sequoia, and Kleiner Perkins Caufield Byers have all followed on to early FundersClub investments. From July 2012 to March 2016, FundersClub reported unrealized net IRR of 37.1%.</p>
<p>And on Friday, FundersClub announced the launch of FCVC Advisors &mdash; a new arm of the business to keep the momentum going by letting institutional investors like hedge funds, endowments, and foundations to get in on the action.</p>
<h2>Not exactly Kickstarter</h2>
<p>Mittal says the Kickstarter comparison is "understandable," but only half-right: FundersClub has an in-house staff that does the same due diligence and vetting as any other venture capital firm. Those 18,000-ish members basically scout for prospective deals, but FundersClub won't list it on the platform unless it passes muster.&nbsp;</p>
<p>Plus, the average FundersClub investment amount is around $250,000, Mittal says. So the firm is focused on smaller, younger companies with big opportunities in front of them, in order to get the most bang for their members' buck.</p>
<p><img src="http://static2.businessinsider.com/image/5589d3216da811be69a71e9c-2400/stewart-001-15.jpg" alt="stewart 001 15" data-mce-source="Slack" /></p>
<p>"There's actually a high standard, a bar that has to be cleared," Mittal says.</p>
<p>Furthermore, to join the FundersClub "network," you need to be properly vetted and certified as an investor. With members making an average investment of $10,000 in each company, and a high risk that a <a href="http://www.businessinsider.com/washio-on-demand-laundry-shuts-down-2016-8">company could go bust and leave investors with nothing</a>, FundersClub isn't for everyone.</p>
<p>"We're very transparent about the risks," Mittal says.&nbsp;</p>
<h2>Advantages to each</h2>
<p>For both sides, there are clear advantages.</p>
<p>For startup founders, they get access to that 18,000-member strong network. If a FundersClub-backed founder needs an introduction at, say, Facebook's Oculus, they can log on to the website, see if any of their backers works there, and ask for an introduction. Plus, it takes less time than the traditional hustle for capital, especially at the early stage.</p>
<p>And for those investors, it gives them access to the Silicon Valley startup scene. The traditional FundersClub investor is usually well-off, but definitely not obscenely so &mdash; meaning that, unless they're lucky enough to know a guy who knows a guy at the earliest stages of building a company, it's hard to get a foot in the door and use startup investments to diversify your portfolio.</p>
<p>"That kind of access previously wasn't possible," Mittal says.</p>
<p><img src="http://static4.businessinsider.com/image/57b756e0db5ce954008b7d8d-1280/marc andreessen.jpg" alt="Marc Andreessen" data-mce-source="Michael Kovac/Getty Images" /></p>
<p>Now, with the launch of FCVC Advisors, FundersClub is taking the same principle and bringing it to the more traditional sources of venture capital, including funds and foundations. Typically, larger institutional foundations, or LPs as they&rsquo;re called, opt to invest their money in VC stalwarts like Sequoia and Andreessen, but there&rsquo;s still <a href="http://www.businessinsider.com/andreessen-horowitz-raises-15-billion-fund-v-2016-6">a line out the door just to participate</a>.</p>
<p>"The problem is that it's very lonely at the top," Mittal says.</p>
<p>By using this new institutional arm to bring in larger investors, FundersClub can add them to the network and keep that train rolling. Startups get easier access to those institutional investors; those institutional investors get more direct access to startups. That's important, as startups take longer to enter the public markets.</p>
<p>Most of all, though, Mittal says it's just furthering FundersClub's mission of reinventing venture capital &mdash; a model that he says hasn't changed much since the '60's &mdash; for the modern web era.</p>
<p>"We want to be the Sequoia of the internet," Mittal says.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/is-andreessen-horowitz-is-a-success-or-a-failure-2016-9" >It's way too early to say whether Silicon Valley's highest-profile investor is a success or a failure</a></strong></p>
<p><a href="http://www.businessinsider.com/fundersclub-launches-fcvc-institutional-arm-2016-9#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/whats-wrong-with-brogramming-in-silicon-valley-2016-6">Bumble founder: Here's what's seriously wrong with the growing trend in Silicon Valley called 'brogramming'</a></p> http://www.businessinsider.com/silicon-valley-bank-early-venture-rounds-for-healthcare-rising-2016-7A Silicon Valley banker says this is the most surprising trend he's seen in healthcarehttp://www.businessinsider.com/silicon-valley-bank-early-venture-rounds-for-healthcare-rising-2016-7
Sun, 31 Jul 2016 11:30:00 -0400Lydia Ramsey
<p><img style="float:right;" src="http://static6.businessinsider.com/image/56ab8cdbc08a809b088bd976-2400/blood drawing-3.jpg" alt="Blood Drawing standard" data-mce-source="Hollis Johnson/Business Insider" data-mce-caption="A standard blood draw." /></p><p>The travails of Theranos &mdash; once a Silicon Valley favorite, now a poster child for what can go wrong with hot startups &mdash; have done nothing to slow investment in the healthcare sector.</p>
<p>Early-stage funding for healthcare-focused startups is on pace to hit a record $2 billion in 2016, <a href="https://www.svb.com/uploadedFiles/Content/Blogs/Healthcare_Report/healthcare-report-2016-mid-year.pdf">according to a recent report by Silicon Valley Bank</a>.</p>
<p>The dollars are coming on the heels of some high-profile success stories, like DNA-mapping startup 23andMe, which is&nbsp;<a href="http://www.businessinsider.com/23andme-raises-115-million-in-funding-round-2015-10">valued at $1.1 billion</a>.</p>
<p>Solving big healthcare problems with technology is appealing to investors who already think of themselves as out to change the world.</p>
<p>"I think you're seeing unprecedented new entities, new therapies, and faster ways of doing things," said Jon Norris, managing director for SVB's healthcare practice. "I think there is that optimistic feeling that's the reason why you're seeing more investors."</p>
<p>Investors are particularly interested in diagnostics and medical tools (think: <a href="http://www.businessinsider.com/what-can-i-learn-from-a-color-genomics-test-2016-4">a genetics test</a>, or a <a href="http://www.businessinsider.com/andreessen-horowitz-invests-in-freenome-through-new-bio-fund-2016-6">liquid biopsy</a> that looks for tumor DNA in the blood). Already, by SVB's analysis, there have been more early-stage series A funding deals in the first half of 2016 than the entirety of 2015, worth more than each of the last few years.</p>
<p>Still, Norris notes that investors in the sector now are years from being able to see a way out of their investments. Typical exits for early investors, like initial public offerings, are rare these days. So it makes the increased funding somewhat surprising.</p>
<p>"It's counterintuitive," Norris said. "Why you would increase early-stage and make bigger investments into a sector where you're seeing struggle to get to [mergers and acquisitions] and IPO?" he said. "It all comes down to trying to make the right midterm bet."</p>
<p><img src="http://static3.businessinsider.com/image/579767a988e4a725238ba854-909/diagnostics.jpg" alt="diagnostics" data-mce-source="Silicon Valley Bank" /></p>
<p>A lot more "diverse" investments are in the diagnostics and tools area, including from&nbsp;tech investors looking to get more involved in the healthcare space. Unlike drug development, which can be a much trickier area to jump into, tech companies are equipped to tackle diagnostics and medical tools a lot more easily.</p>
<p>"You have a data problem that's out there," Norris said. For example, a genetics test that sequences your DNA and analyzes that information to tell you whether you have a certain trait that could predispose you to cancer is something a tech company could more easily approach.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/alexandria-center-for-life-science-office-tour-in-manhattan-2016-7" >Take a look inside the stunning offices where companies are reinventing NYC's biotech scene</a></strong></p>
<p><strong>DON'T MISS:&nbsp;<a href="http://www.businessinsider.com/the-best-cities-to-get-healthcare-2016-7" >RANKED: The 10 cities where you'll get the best medical care</a></strong></p>
<p><a href="http://www.businessinsider.com/silicon-valley-bank-early-venture-rounds-for-healthcare-rising-2016-7#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/search-for-aliens-fermi-paradox-solution-planetary-scientist-alan-stern-2017-12">This planetary scientist has a new idea for why we haven't heard from aliens yet</a></p> http://www.businessinsider.com/silicon-valley-bank-early-venture-rounds-for-healthcare-rising-2016-7A Silicon Valley banker says this is the most surprising trend he's seen in healthcarehttp://www.businessinsider.com/silicon-valley-bank-early-venture-rounds-for-healthcare-rising-2016-7
Tue, 26 Jul 2016 12:54:01 -0400Lydia Ramsey
<p><img style="float:right;" src="http://static6.businessinsider.com/image/56ab8cdbc08a809b088bd976-2400/blood drawing-3.jpg" alt="Blood Drawing standard" data-mce-source="Hollis Johnson/Business Insider" data-mce-caption="A standard blood draw." /></p><p>The travails of Theranos &mdash; once a Silicon Valley favorite, now a poster child for what can go wrong with hot startups &mdash; have done nothing to slow investment in the healthcare sector.</p>
<p>Early-stage funding for healthcare-focused startups is on pace to hit a record $2 billion in 2016, <a href="https://www.svb.com/uploadedFiles/Content/Blogs/Healthcare_Report/healthcare-report-2016-mid-year.pdf">according to a recent report by Silicon Valley Bank</a>.</p>
<p>The dollars are coming on the heels of some high-profile success stories, like DNA-mapping startup 23andMe, which is&nbsp;<a href="http://www.businessinsider.com/23andme-raises-115-million-in-funding-round-2015-10">valued at $1.1 billion</a>.</p>
<p>Solving big healthcare problems with technology is appealing to investors who already think of themselves as out to change the world.</p>
<p>"I think you're seeing unprecedented new entities, new therapies, and faster ways of doing things," said Jon Norris, managing director for SVB's healthcare practice. "I think there is that optimistic feeling that's the reason why you're seeing more investors."</p>
<p>Investors are particularly interested in diagnostics and medical tools (think: <a href="http://www.businessinsider.com/what-can-i-learn-from-a-color-genomics-test-2016-4">a genetics test</a>, or a <a href="http://www.businessinsider.com/andreessen-horowitz-invests-in-freenome-through-new-bio-fund-2016-6">liquid biopsy</a> that looks for tumor DNA in the blood). Already, by SVB's analysis, there have been more early-stage series A funding deals in the first half of 2016 than the entirety of 2015, worth more than each of the last few years.</p>
<p>Still, Norris notes that investors in the sector now are years from being able to see a way out of their investments. Typical exits for early investors, like initial public offerings, are rare these days. So it makes the increased funding somewhat surprising.</p>
<p>"It's counterintuitive," Norris said. "Why you would increase early-stage and make bigger investments into a sector where you're seeing struggle to get to [mergers and acquisitions] and IPO?" he said. "It all comes down to trying to make the right midterm bet."</p>
<p><img src="http://static3.businessinsider.com/image/579767a988e4a725238ba854-909/diagnostics.jpg" alt="diagnostics" data-mce-source="Silicon Valley Bank" /></p>
<p>A lot more "diverse" investments are in the diagnostics and tools area, including from&nbsp;tech investors looking to get more involved in the healthcare space. Unlike drug development, which can be a much trickier area to jump into, tech companies are equipped to tackle diagnostics and medical tools a lot more easily.</p>
<p>"You have a data problem that's out there," Norris said. For example, a genetics test that sequences your DNA and analyzes that information to tell you whether you have a certain trait that could predispose you to cancer is something a tech company could more easily approach.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/alexandria-center-for-life-science-office-tour-in-manhattan-2016-7" >Take a look inside the stunning offices where companies are reinventing NYC's biotech scene</a></strong></p>
<p><strong>DON'T MISS:&nbsp;<a href="http://www.businessinsider.com/the-best-cities-to-get-healthcare-2016-7" >RANKED: The 10 cities where you'll get the best medical care</a></strong></p>
<p><a href="http://www.businessinsider.com/silicon-valley-bank-early-venture-rounds-for-healthcare-rising-2016-7#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/search-for-aliens-fermi-paradox-solution-planetary-scientist-alan-stern-2017-12">This planetary scientist has a new idea for why we haven't heard from aliens yet</a></p> http://www.businessinsider.com/what-facebook-teaches-us-about-investing-2016-6Here's what Facebook can teach us about investinghttp://www.businessinsider.com/what-facebook-teaches-us-about-investing-2016-6
Fri, 17 Jun 2016 18:48:00 -0400Chris Marx
<p><img style="float:right;" src="http://static3.businessinsider.com/image/5761688a52bcd022008c9549-585/facebook-revenue-jumps-519-percent-as-mobile-ad-sales-surge-2016-4.jpg" alt="People are silhouetted as they pose with mobile devices in front of a screen projected with a Facebook logo, in this picture illustration taken in Zenica October 29, 2014. REUTERS/Dado Ruvic " data-mce-source="Thomson Reuters" data-mce-caption="People pose with mobile devices in front of projection of Facebook logo in this picture illustration taken in Zenica" /></p><p>Facebook came under fire recently for allegedly suppressing pro-conservative news on its Trending newsfeed. The social-networking giant argued that, while editors were involved, its use of computer algorithms to determine what&rsquo;s trending precludes bias.</p>
<p>We&rsquo;re not here to take a stand on Facebook&rsquo;s role in setting news flow. What&rsquo;s most interesting to us, as professional investors, is the perception of a computer algorithm as a detached and impartial tool. This topic is particularly relevant today, when smart-beta and other quantitative-based techniques are increasingly being used to construct portfolios.</p>
<p>As <em>New York Times </em>technology writer Farhad Manjoo pointed out in his article on the controversy, &ldquo;It&rsquo;s true that beyond the Trending box, most of the stories Facebook presents to you are selected by its algorithms, but those algorithms are as infused with bias as any other human editorial decision.&rdquo;</p>
<p><strong>Algorithms: Designed by Humans</strong></p>
<p>That&rsquo;s also true of many of the rules-based approaches used to construct ETFs. Indeed, as with any set of rules used to make selections&mdash;whether of news items or stocks&mdash;they are written by people, and thus are the product of human assumptions and beliefs.</p>
<p>To illustrate how profound this &ldquo;human touch&rdquo; can be, let&rsquo;s take a look at two popular low-volatility ETFs, commonly used in smart-beta and other passive investing strategies. Both ETFs aim to take advantage of the well-documented low-beta effect to capture equity returns with less risk. Both use rules-based approaches, and both have been very successful at delivering risk-adjusted performance (and attracting assets). Both outperformed the S&amp;P 500 Index over the past three years.</p>
<p>However, let&rsquo;s take a quick peek under the hood at the algorithms used to construct these ETFs. That&rsquo;s when the influence of human choices on the composition of these ETFs&rsquo; holdings and, ultimately, on their pattern of performance, becomes most apparent.</p>
<p>Low-Volatility ETF A uses a simple construction rule: to own the 100 stocks that have exhibited the lowest volatility over the prior year, and weight them based on the inverse of their volatility (i.e., give the greatest weight to the least-volatile stock). Low-Volatility ETF B uses a completely different methodology. It employs an optimization framework to build a portfolio that it expects to have the lowest risk possible based on each individual stock&rsquo;s historical volatility and its correlation to other securities. The overall portfolio is then subject to constraints relative to the capitalization-weighted index. If that sounds complicated, that&rsquo;s because it is.</p>
<p>The differences in methodology make for significant differences in each ETF&rsquo;s holdings, which in turn provide insights into how these products may perform in the future and the kinds of environments that may be favorable or challenging for them.</p>
<p>For example, because it focuses only on recent volatility, ETF A has a very large exposure to traditionally safe-haven or economically defensive sectors such as consumer staples and utilities&mdash;as well as, perhaps surprisingly, industrials. On the other hand, ETF B&rsquo;s approach, while also overweight utilities, results in a large overweight to healthcare, and is much more exposed to technology than ETF A is (<em>Display</em>).</p>
<p><img src="http://static1.businessinsider.com/image/5761670552bcd044008c95c9-800/graph-1.gif" alt="graph 1" data-mce-source="Morningstar, S&amp;P and AB" /></p>
<p><span>One thing the two have in common is that they both trade at a premium to the market (</span><em>Display</em><span>). That reflects the outperformance of lower-risk stocks in recent years and, more directly, the fact that neither ETF considers valuation in its construction.</span></p>
<p><span><img src="http://static1.businessinsider.com/image/5761672852bcd022008c9540-800/graph-2.gif" alt="graph 2" data-mce-source="FactSet, S&amp;P and AB" /></span></p>
<p><strong>A Better Way: Data-Informed and Active</strong></p>
<p>These low-volatility ETF methodologies offer a lot of good ideas, many of which are applicable to designing a better core equity strategy. But there is another way to tap this return potential: by actively targeting earnings quality, balance-sheet strength and attractive valuation.</p>
<p>We think this is a better methodology. But is it unbiased? Of course not. It reflects our perspective on the best way to achieve risk-adjusted returns.</p>
<p>As the Facebook incident showed, computers aren&rsquo;t necessarily unbiased when it comes to news judgment&mdash;or selecting your portfolio. The algorithms used to create passive or smart-beta portfolios reflect the assumptions and beliefs of the humans who designed them. And just because one approach did better than the other over a period of time doesn&rsquo;t mean that it will continue to do so. For one thing, the ETFs&rsquo; concentrations in pricey sectors and stocks pose a significant risk, in our view&mdash;and a risk that many investors seem to be giving short shrift. In the end, investors need to look at these strategies with their eyes wide open.</p>
<p><em>The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.</em></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/investing-in-americas-markets-now-gets-you-less-than-any-time-in-history-2016-6" >Investing in America now gets you less than 'any time in history'</a></strong></p>
<p><a href="http://www.businessinsider.com/what-facebook-teaches-us-about-investing-2016-6#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/why-some-people-turn-red-drink-alcohol-2017-4">The disturbing reason some people turn red when they drink alcohol</a></p> http://www.businessinsider.com/warren-buffett-wont-buy-these-3-stocks-2016-6Warren Buffett won't buy these 3 types of stockshttp://www.businessinsider.com/warren-buffett-wont-buy-these-3-stocks-2016-6
Thu, 16 Jun 2016 18:45:00 -0400Matthew Frankel
<p><img style="float:right;" src="http://static2.businessinsider.com/image/56d1a26f6e97c61a008ba299-2400/gettyimages_71300027.jpg" alt="warren Buffett" data-mce-source="Getty Images / Spencer Platt" data-mce-caption="Warren Buffett" /></p><p>Many people are surprised the first time they look at the stock portfolio of Warren Buffett's Berkshire Hathaway. Specifically, because of Berkshire's amazing returns over the past 50 years, some incorrectly assume that Buffett hit a few "home runs" &mdash; tech stocks in the 80s, perhaps.</p>
<p>However, Berkshire's stock-picking success has mainly been due to good (not amazing) returns that were sustained over long periods of time.</p>
<p>With that in mind, there are several types of stocks Buffett and company tend to stay away from. Here are three examples, and the reasoning behind each.</p><h3>Tech stocks and biotechs</h3>
<img src="http://static2.businessinsider.com/image/5762ad0552bcd022008c99a1-400-300/tech-stocks-and-biotechs.jpg" alt="" />
<p><p>While there are a couple of exceptions in Berkshire's current portfolio &mdash; <strong>IBM</strong>and <strong>Apple</strong> &mdash; Buffett generally doesn't invest in tech stocks. And the main reason is simple enough: Buffett doesn't understand most tech companies' business well enough to make an informed investment decision. The same can be said for many biotech companies: It's simply too difficult for most people without expertise in the field to properly evaluate these stocks as long-term investments.</p>
<p>Around the time of the dot-com bubble, investors were wondering why Buffett wasn't hopping on the bandwagon, so he offered two more specific reasons for avoiding tech. First, he pointed out that tech companies tend to have limited "moats." A wide moat refers to a durable competitive advantage that preserves market share and facilitates profitability for years to come &mdash; for example, <strong>Wal-Mart</strong>'s wide moat is its size and distribution network, which allow it to sell items cheaper than its competition.</p>
<p>Second, Buffett correctly said it is extremely difficult to pick winners in the tech sector early on, and even more difficult to build a position at a reasonable valuation. As we saw in the aftermath of the tech crash, many of the valuations in the sector in 1999 and 2000 were simply ridiculous, even for the companies that stood the test of time.</p>
<p>IBM and Apple are exceptions because they have many other Buffett-stock qualities that make them solid, predictable investments. Even though Buffett didn't directly make the Apple investment, he has praised both companies' management throughout the years. Both companies also have tremendous financial flexibility, and a long-established record of profitability. And, both have a "wide moat." If you're interested, here are discussions about why Berkshire has <a href="http://www.fool.com/investing/2016/05/29/why-does-warren-buffett-keep-buying-ibm.aspx" target="_blank">IBM</a> and <a href="http://www.fool.com/investing/general/2016/05/16/warren-buffett-is-right-apple-inc-stock-is-underva.aspx" target="_blank">Apple</a> in its portfolio.</p></p>
<br/><br/><h3>Companies with big capital needs but low profit potential</h3>
<img src="http://static1.businessinsider.com/image/5762af1052bcd022008c99b5-400-300/companies-with-big-capital-needs-but-low-profit-potential.jpg" alt="" />
<p><p>As Buffett said in his 2007 letter to shareholders, "The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money."</p>
<p>Many tech companies fall into this category, as do many of the young companies I'll discuss in the next section. However, Buffett offered one specific example in that letter: airlines. Buffett pointed out that a durable competitive advantage (wide moat) has been elusive in the airline industry since the beginning, and that the demand for capital is neverending.</p>
<p>He discussed the example of when Berkshire bought US Air preferred stock in 1989, only to see the company face tremendous financial difficulty and stop paying the dividend. Berkshire was luckily able to get out of the investment at a profit in 1998, but over the next decade, the company went bankrupt twice. Common shareholders weren't so lucky. To this day, airlines have been notably absent from Berkshire's stock and subsidiary portfolios. (Note: Berkshire does own NetJets, but that isn't an airline in the traditional sense.)</p>
<p>As a counterexample, consider See's Candies, a Berkshire subsidiary. When Berkshire bought See's in 1972, the company's pre-tax profits were about $5 million, and $8 million in capital was needed to run the business. By 2007, See's profits had grown to $82 million for the year, with a capital requirement of just $40 million. In fairness, Buffett points out that See's is an exception to the rule &mdash; companies with this level of growth typically need about $400 million in capital investment to achieve similar results.</p>
<p>My point is not to comment on the current investment merit of airline stocks. Rather, the point is that when you make an investment, there should be reasonable capital demands, significant profit potential, <em>and</em> an identifiable durable competitive advantage. As an investor, you can compare companies' returns on invested capital in order to assess whether or not capital requirements are justified by the profitability.</p></p>
<br/><br/><h3>Young companies</h3>
<img src="http://static3.businessinsider.com/image/5762af3352bcd05c658c970e-400-300/young-companies.jpg" alt="" />
<p><p>In the tech discussion, I mentioned how Buffett found these companies difficult to analyze early on. Well, the same logic can be applied to virtually any new, untested company. This is why you'll never see Buffett invest in companies like<strong>Tesla </strong>or <strong>Netflix</strong>. These businesses may end up doing great, but for now, they simply haven't had a chance to develop and mature long enough to produce the kind of consistent profits Buffett likes to see. If you look at Berkshire's portfolio, it's tough to find any companies that haven't been around for several decades.</p>
<p>On a related note, I can't emphasize enough the value Buffett places on a company's management. Buffett believes good management can literally add billions to the intrinsic value of a company, and that poor management can make a business undesirable from an investment standpoint. With newer companies, there is simply no way to know if the managers are shareholder-friendly and fiscally responsible.</p></p>
<br/><br/><a href="http://www.businessinsider.com/warren-buffett-wont-buy-these-3-stocks-2016-6#/#you-can-apply-these-lessons-to-your-own-investment-choices-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/millennials-are-impatient-in-investing-2016-6Millennials are too impatient when it comes to making moneyhttp://www.businessinsider.com/millennials-are-impatient-in-investing-2016-6
Thu, 16 Jun 2016 11:15:44 -0400Chloe Pfeiffer
<p><span style="font-weight: 400;"><img style="float:right;" src="http://static4.businessinsider.com/image/57629ebd52bcd026008c98eb-2400/rtxe69x.jpg" alt="millennials Coachella" data-mce-source="Reuters/Mario Anzuoni" data-mce-caption="Concert goers dance at the Coachella Music Festival in Indio, California." data-link="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;VBID=2C0BXZE3LU8MV&amp;SMLS=1&amp;RW=1290&amp;RH=905#/SearchResult&amp;VBID=2C0BXZE3LU8MV&amp;SMLS=1&amp;RW=1290&amp;RH=905&amp;PN=15&amp;POPUPPN=850&amp;POPUPIID=2C0BF1YQZ0PR" /></span></p>
<p><span style="font-weight: 400;">Investors, and especially young investors, have unrealistic expectations about their money.</span></p>
<p><span style="font-weight: 400;">The annual <a href="http://www.schroders.com/en/us/institutional/insights/global-investor-study/are-millennial-investors-facing-a-perfect-storm/">Global Investor Study</a>, a study commissioned by <span>Schroders</span> Investment Management that surveyed 20,000 investors from around the world, was released Wednesday, and its main takeaway probably shouldn&rsquo;t be a surprise: People expect higher investment income on assets held for a shorter period of time than is realistic.</span></p>
<p><span style="font-weight: 400;">On average, investors hope to generate 9.1% annually in investment income, but with many countries&rsquo; interest rates at historic lows, <a href="http://www.businessinsider.com/stock-market-will-suck-2016-4">most of these investors could end up disappointed</a>.</span></p>
<p><span style="font-weight: 400;">Millennials, which the Schroders report defined as investors aged 18 to 35, have especially disproportionate goals: The minimum desired investment income was 10.2% for millennials, compared with 8.4% for investors older than 36.</span></p>
<p><span style="font-weight: 400;">Global investors also seem to be biased toward short-term investing &mdash; on average, they expect to hold their investments for a little over three years, which "is often too short a time period to counteract the volatility" of equities, the report says. </span></p>
<p><span style="font-weight: 400;">Less than a fifth of investors said they held investments for at least five years, "the minimum realistic holding period for equity investments," as noted by the authors of the report. This bias was, once again, exaggerated for millennials, who expected to hold their investments an average of one and a half years less than older investors. Millennials are also the <a href="http://www.businessinsider.com/millennials-investing-getting-it-wrong-2016-2"><span style="font-weight: 400;">least likely age group</span></a><span style="font-weight: 400;"> to actually stick to an investment plan. </span></span></p>
<p>Millennials also tend to invest for immediate financial requirements, like to supplement their salary, buy things, or pay for children, and they&rsquo;re less likely to see investment as a way to supplement their pensions and grow their retirement portfolios, according to the Schroders report. <span style="font-weight: 400;">And even though their investment window is longer, they hold </span><a href="http://www.businessinsider.com/millennials-cautious-investors-2016-5"><span style="font-weight: 400;">almost twice as much cash</span></a><span style="font-weight: 400;"> in their portfolios as baby boomers.</span></p>
<p><span style="font-weight: 400;">Thinking long-term is easier said than done, of course, but especially in a time of such low interest rates, millennials might have to start practicing patience when it comes to their investments &mdash; or else be left very disappointed.</span></p>
<p><strong><a href="http://www.schroders.com/en/us/institutional/insights/global-investor-study/are-millennial-investors-facing-a-perfect-storm/">For more, check out the full survey results here</a>.</strong></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/were-witnessing-death-of-investment-2016-6" >We're witnessing 'the death of investment'</a></strong></p>
<p><a href="http://www.businessinsider.com/millennials-are-impatient-in-investing-2016-6#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/fed-already-preparing-for-next-recession-2017-11">The Fed is trying to prepare for the next recession without causing it</a></p> http://www.businessinsider.com/yuri-milner-predictions-internet-physics-aliens-2016-49 bold predictions made by Russian billionaire Yuri Milnerhttp://www.businessinsider.com/yuri-milner-predictions-internet-physics-aliens-2016-4
Tue, 12 Apr 2016 11:10:00 -0400Alexandra Ossola
<p><img style="float:right;" src="http://static1.businessinsider.com/image/570d1012dd08954e6c8b4882-1328-996/gettyimages-496361160.jpg" alt="yuri milner christina aguilera getty" data-mce-source="Getty"></p><p>At 54, Russian-born billionaire Yuri Milner has earned his place among the elite venture capitalists.</p>
<p>He’s gotten in on the ground floor of some of the biggest companies in tech, elevating his new worth to about <a href="http://www.forbes.com/profile/yuri-milner/" target="_blank">$3 billion</a>.</p>
<p>But as a trained physicist and a person who thinks on a global scale, his predictions vault far beyond Silicon Valley.</p>
<p>Here are nine of the most amazing predictions he’s made over the past few years.</p>
<p><em>This article was written by Alexandra Ossola from <a href="http://www.popsci.com/yuri-milners-9-most-astounding-predictions?dom=newscred&amp;src=syn" target="_blank">Popular Science</a> and was legally licensed through the NewsCred publisher network.<div>
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</div></em></p><h3>1) Social media will be huge.</h3>
<img src="http://static2.businessinsider.com/image/570d1012dd08954e6c8b4883-400-300/1-social-media-will-be-huge.jpg" alt="" />
<p><p>Milner first made headlines in 2009 when he invested $200 million in a little startup called Facebook.</p>
<p>That gamble ended up being worth $2 billion, according to the <a href="http://www.wsj.com/articles/SB10001424052702304337404579209950328966242" target="_blank">Wall Street Journal</a>.</p>
<p>His company, DST Global, invested another $400 million in Twitter in 2011, and $125 million into WhatsApp.</p>
<p>He told the <a href="http://www.nytimes.com/2012/05/16/technology/a-russian-facebook-bet-pays-off-big.html">New York Times</a>&nbsp;that he had a hunch that social media could be a powerful force, after watching the print market get weaker Russia in the late 2000s.</p>
<p>&ldquo;At the time, I was probably the best-informed person in the world about social networking monetization,&rdquo; he said.</p></p>
<br/><br/><h3>2) Physicists should earn as much as athletes.</h3>
<img src="http://static2.businessinsider.com/image/570d1012dd08954e6c8b4884-400-300/2-physicists-should-earn-as-much-as-athletes.jpg" alt="" />
<p><p>Trained as a physicist himself, Milner believes that science is one of the things that makes us uniquely human.</p>
<p>In his opinion, the most innovative scientists weren&rsquo;t doing enough.</p>
<p>So he, along with tech gurus Sergey Brin, Mark Zuckerberg, and Jack Ma, created the Breakthrough Prize.</p>
<p>First awarded in 2012, the winning researchers receive $3 million to continue their work.</p>
<p>&ldquo;I wanted this amount to be meaningful,&rdquo; Milner <a href="http://blogs.reuters.com/chrystia-freeland/2012/08/02/russian-investor%E2%80%99s-3-million-prize-for-physics/" target="_blank">told Reuters</a> in 2012.</p>
<p>&ldquo;I think top scientists need to be compensated at a different scale in society. Somebody with experience will tell you that true scientists are not motivated by money &ndash; they are motivated by the quest itself. That is true. But I think an additional recognition will not hurt.&rdquo;</p></p>
<br/><br/><h3>3) Online companies are more efficient.</h3>
<img src="http://static2.businessinsider.com/image/570d1012dd08954e6c8b4885-400-300/3-online-companies-are-more-efficient.jpg" alt="" />
<p><p>&ldquo;Big Internet companies on average are capable of generating revenue of $1 million per employee, and that compares to 10 to 20 percent of that which is normally generated by traditional offline businesses of comparable size,&rdquo; Milner said <a href="http://blogs.reuters.com/chrystia-freeland/2011/09/23/yuri-milner-on-the-future-of-the-internet/" target="_blank">during a presentation</a> at the Yalta Annual Meeting in September 2011.</p>
<p>That&rsquo;s an efficiency that&rsquo;s not going away, he said, citing the example that one engineer at Facebook can support about a million users.</p>
<p>The downside, though, is that when &ldquo;inefficient&rdquo; brick-and-mortar businesses go bankrupt, middle-class people lose their jobs, as <a href="http://blogs.reuters.com/chrystia-freeland/2012/09/21/globalization-the-tech-revolution-and-the-middle-class/" target="_blank">Reuters points out</a>.</p>
<p>Milner estimated then that 20 percent of retail sales will be done online by 2020.</p>
<p>It looks like we might not hit that mark&mdash;in the final quarter of 2015, ecommerce accounted for <a href="https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf" target="_blank">7.3 percent</a> of total commerce sales, according to the U.S. Census Bureau.</p>
<p>And, bizarrely, some online retailers like Amazon are going back and&nbsp;<a href="http://www.popsci.com/amazon-will-open-physical-bookstores-in-battle-against-common-sense">building physical stores</a>.</p>
<p>Milner might not have been right on the money for this prediction, but there&rsquo;s no denying that online sales continue to grow.</p></p>
<br/><br/><a href="http://www.businessinsider.com/yuri-milner-predictions-internet-physics-aliens-2016-4#/#4-genetics-are-the-future-of-health-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/companies-elon-musk-invests-in-2016-4Tesla and SpaceX aren't the only things Elon Musk has invested inhttp://www.businessinsider.com/companies-elon-musk-invests-in-2016-4
Mon, 11 Apr 2016 17:10:00 -0400Julia Calderone
<p><img style="float:right;" src="http://static6.businessinsider.com/image/566eccdedd08952f058b4581-2829-2122/elon musk, 2x1.jpg" alt="Elon Musk" data-mce-source="REUTERS/Danny Moloshok"></p><p>Tech entrepreneur Elon Musk is on fire right now.</p>
<p>His company SpaceX just ushered in a new era of spaceflight by launching a rocket into space, and then <a href="http://www.techinsider.io/spacex-rocket-landing-ocean-success-2016-4">improbably landing it</a> on a floating robotic ship in the Atlantic Ocean.</p>
<p>His electric car company Tesla also <a href="http://www.businessinsider.com/tesla-325000-orders-model-3-one-week-2016-4">just made automobile history</a> by raking in hundreds of thousands of pre-orders — worth about $14 billion in future sales — for its upcoming <a href="http://www.techinsider.io/photos-here-is-the-tesla-model-3-2016-4">Model 3</a>.</p>
<p>Musk himself is <a href="http://www.forbes.com/profile/elon-musk/">worth $14.3 billion</a> as of April 2016, though he allegedly <a href="http://www.techinsider.io/elon-musk-says-theres-no-such-thing-as-a-business-2015-9">doesn't believe in the word "business."</a></p>
<p>Whatever Musk labels his efforts, he sure has entwined himself in a bunch of them — major online payment services, building and launching spacecraft, and trying to <a href="http://www.techinsider.io/map-shows-solar-panels-to-power-the-earth-2015-9">cover the world with solar panels</a>, to name a few.</p>
<p>The breadth of his reach is astounding and enough to make anyone feel exhausted.</p>
<p>To cut through that complexity, we've highlighted 19 entities that Musk has reportedly founded, cofounded, invested in, or supported in some way.</p><h3>1. Musk's first company was Zip2 Corporation — the web's first Yellow Pages — in 1995.</h3>
<img src="http://static1.businessinsider.com/image/55fa9ad9dd08956d3a8b45a2-400-300/1-musks-first-company-was-zip2-corporation--the-webs-first-yellow-pages--in-1995.jpg" alt="" />
<p><p>Musk was 24 when he dropped out of graduate school for physics at Stanford University to launch his first company, <a href="http://www.britannica.com/topic/Zip2">Zip2 Corporation</a> &mdash; a dot-com media company that supplied maps and business directories to online newspapers.</p>
<p>He linked digital online maps from <a href="https://mapreporter.navteq.com/#dashboard">Navteq</a> to a business directory and created the <a href="http://www.inc.com/magazine/20071201/entrepreneur-of-the-year-elon-musk_pagen_4.html">internet's first online Yellow Pages</a>.</p>
<p>Four years later, in 1999, Musk sold the company to computer-manufacturer Compaq for $307 million. At that time, it was the largest amount ever paid for an internet company.</p></p>
<br/><br/><h3>2. He founded online payment company X.com in 1999, which eventually merged with PayPal.</h3>
<img src="http://static4.businessinsider.com/image/55fa9ad9dd08956d3a8b45a3-400-300/2-he-founded-online-payment-company-xcom-in-1999-which-eventually-merged-with-paypal.jpg" alt="" />
<p><p>The same year Musk sold Zip2, he used $10 million from the sale to <a href="http://inventors.about.com/od/mstartinventions/p/Elon-Musk.htm">found the online financial-services company</a> X.com.</p>
<p>Musk wanted to focus on the new technology of making payments via email, so he merged his company with a competitor called <a href="https://www.crunchbase.com/organization/confinity">Confinity</a> &mdash; which started the online money transfer process <a href="https://www.paypal.com/home">PayPal</a>.</p>
<p>In a heated clash of personalities and egos, however, the cofounders of Confinity fired Musk from the board, then renamed the company PayPal.</p>
<p>The online auction company <a href="http://www.ebay.com/">eBay</a> purchased PayPal in <a href="http://www.britannica.com/biography/Elon-Musk#ref1121137">2002 for $1.5 billion</a>.</p></p>
<br/><br/><h3>3. In 1998, Musk invested in IT company Everdream Corporation, which was eventually sold to Dell.</h3>
<img src="http://static1.businessinsider.com/image/55fa9ad9dd08956d3a8b45a4-400-300/3-in-1998-musk-invested-in-it-company-everdream-corporation-which-was-eventually-sold-to-dell.jpg" alt="" />
<p><p>Cofounded in 1998 by Musk's cousin, Lyndon Rive, Everdream sold desktop management services to small businesses. It also managed and fixed antivirus software, performed data backups, and administered data encryption.</p>
<p>Musk, who was still involved with PayPal at the time, invested in Everdream on the fourth round, according to the <a href="http://www.bizjournals.com/sanjose/blog/2010/12/family-joins-colleagues-for-teslas-musk.html">Silicon Valley Business Journal</a>.</p>
<p>Rive and his twin brother, Russ, sold the company, headquartered in Fremont, California, to Dell in 2007.</p></p>
<br/><br/><a href="http://www.businessinsider.com/companies-elon-musk-invests-in-2016-4#/#4-in-2002-musk-founded-space-exploration-technologies-also-called-spacex-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/secrets-of-four-everyday-millionaires-2016-2Four 'everyday millionaires' reveal how they made so much moneyhttp://www.businessinsider.com/secrets-of-four-everyday-millionaires-2016-2
Mon, 29 Feb 2016 22:59:00 -0500Janna Herron
<p><img style="float:right;" src="http://static4.businessinsider.com/image/560aa3b39dd7cc10008bdc6a-864-648/wolf of wall street copy.jpg" alt="Wolf of Wall Street" data-mce-source="Paramount" data-link="http://www.paramount.com/movies/wolf-wall-street" /></p><p>When you picture a millionaire&rsquo;s lifestyle, does townhouse living or budgeting only $40,000 a year come to mind?</p>
<p>Probably not. But it&rsquo;s that type of frugal living that helped four everyday people to amass their seven-figure net worth and, along with it, financial security.</p>
<p>More than 10 million U.S. households have <a href="http://spectrem.com/Content_Press/march-10-2015-press-release.aspx">a net worth of $1 million or more</a>, a record high representing nearly 9 percent of all households in the country.</p>
<p>While that seems like a small percentage, it&rsquo;s still one in 11 households, which means a millionaire could be tucked away in your neighborhood rather than leading an extravagant life peppered with luxuries and indulgences.</p>
<p>TFT interviewed four &ldquo;everyday millionaires,&rdquo; including Darrow Kirkpatrick, 55, of Santa Fe, New Mexico; Julie Rains, 55, of Winston-Salem, North Carolina; Jeremy Jacobson, 37, world resident; and Jeff Johnson, 41, of Somerset County, New Jersey. Through disciplined saving and savvy, yet simple investing, they grew their wealth enough to travel the world, retire years earlier than the norm and enjoy peace of mind.</p>
<p><a href="http://www.thefiscaltimes.com/Media/Slideshow/2016/02/29/25-Richest-People-US"></a>&ldquo;These millionaires next door don&rsquo;t have lavish lifestyles,&rdquo; says Farnoosh Torabi a personal finance expert who also interviewed these everyday millionaires on her daily <a href="http://podcast.farnoosh.tv/about/">&ldquo;So Money&rdquo; podcast</a>. &ldquo;But they enjoy their lives. They are very conscious how they want to design their lives to get a lot of financial security.&rdquo;</p>
<p>So how did they do it? Some of the commonalities among the four include hyper-saving, smart and consistent investing and thoughtful spending when it comes to homes, cars, vacations and small treats. They also benefited from earning higher salaries during their working years versus the median income along with other blessings when it came to covering education expenses and health care costs.</p>
<p>Here are their secrets.</p>
<h3><strong><img src="http://static6.businessinsider.com/image/56d4e47c6e97c62c008ba8a8-1024-768/401k-2.jpg" alt="401kpig" /></strong></h3>
<h3><strong>Save&hellip; and Then Save Some More<br /></strong></h3>
<p>Americans on average save 5.5 percent of their after-tax income, according to <a href="https://research.stlouisfed.org/fred2/series/PSAVERT">the latest data available</a>, while conventional wisdom is to put 10 percent away. But these everyday millionaires are socking away a whole lot more. &ldquo;They are super savers,&rdquo; says Torabi. &ldquo;They cut it out of their budget and live with what they have left.&rdquo;</p>
<p>Jeff Johnson, who works in pharma marketing and sales, says that he and his family live on less than half of his take-home pay and save the rest. That may not seem like a lot to live on, but it&rsquo;s enough to allow his wife to stay home to care for their three-year-old son. &ldquo;Whenever we had an opportunity like a bonus or promotion, we never increased our lifestyle,&rdquo; says Johnson, who estimates his net worth at $2.5 million, not including his home.</p>
<p>Jeremy Jacobson and his wife, Winnie&mdash;whose net worth is well north of $1 million&mdash;put away more than 70 percent of their income for over 10 years before retiring more than three years ago to travel the world with their baby son. Jacobson said when he first met his wife in Beijing on a business trip, she was already saving half of her income. They worked up to the 70 percent&mdash;it didn&rsquo;t happen all at once&mdash;by making small changes in their lifestyle along the way.</p>
<p><a href="http://www.thefiscaltimes.com/Quick-Hits/2015/04/07/6-Traits-Emerging-Millionaire-Are-You-One"></a>&ldquo;If you&rsquo;re looking at after-tax income and you&rsquo;re saving 10 percent, after about nine years, you roughly have enough money to take one year off,&rdquo; Jacobson says. &ldquo;But if you&rsquo;re saving 90 percent of income, you can take nine years off after saving nine years.&rdquo;</p>
<h3><strong>Invest Wisely<br /></strong></h3>
<p>A large part of these everyday millionaires&rsquo; success was investing their savings for the long term. That meant first maxing out contributions to 401(k)s, IRAs and ROTH retirement plans and getting the full company match on employer-sponsored plans, if one existed.</p>
<p>After that, the majority of these millionaires kept their investing strategy simple. Darrow Kirkpatrick, who has a net worth between $1 million and $2 million, has only seven holdings for his money. &ldquo;They are mostly mutual funds, index or very low-cost managed fund with about 50/50 stock and bond,&rdquo; he says. &ldquo;That&rsquo;s pretty much how it&rsquo;s been since the early 2000s.&rdquo;</p>
<p><img class="center" src="http://static4.businessinsider.com/image/55b7be58eab8ea2f7bcec64c-799-599/401k-401k.png" alt="401(k) 401k" data-mce-source="Flickr/_e.t" data-mce-caption="A 401(k) tip jar." data-link="https://www.flickr.com/photos/45688285@N00/970158361" />Jacobsen and Johnson also use mostly index funds. Interestingly, all three swear by Vanguard&rsquo;s funds, which are low cost.</p>
<p>Julie Rains, who said her net worth is in the millions but didn&rsquo;t disclose an amount, prefers mutual funds, exchange-traded funds and individual stocks. &ldquo;It does take some time to pick those stocks, but I do like that the best,&rdquo; she says. &ldquo;What I like to look for is a solid performer that is well-priced.&rdquo;</p>
<h3><strong>Reduce Large Expenses<br /></strong></h3>
<p>Kirkpatrick says one of the keys to his success was not overspending on real estate. He and his family owned one modest home in Tennessee for 17 years and only renovated before selling it. &ldquo;We weren&rsquo;t house-swapping. We also didn&rsquo;t dump a lot of money into the house,&rdquo; says Kirkpatrick, who retired in 2011. &ldquo;It&rsquo;s clear that people put huge amounts into their homes and that has huge costs for their financial freedom.&rdquo; Now, he and his wife rent their two-bedroom condo in Santa Fe for $1,500 a month.</p>
<p><a href="http://www.thefiscaltimes.com/2015/06/16/Asia-About-Blow-Past-US-World-s-Wealthiest-Region"></a>Similarly, Rains has lived in the same home for decades and when she bought it, she didn&rsquo;t stretch. Both Kirkpatrick and Rains don&rsquo;t borrow to buy cars&mdash;Kirkpatrick and his wife share only one. They buy recent, used models and keep them for as long as they can.</p>
<p>&ldquo;If you&rsquo;re making a car loan payment, you&rsquo;re not investing that money,&rdquo; says Rains.</p>
<p>Jacobson and his wife didn&rsquo;t buy a home and don&rsquo;t have a car. They chose rentals in Seattle that were located in a walkable neighborhood, close to the bus line and as cheap as they could find. Jacobson also biked to work to save on commuting costs.</p>
<p><img class="center" src="http://static5.businessinsider.com/image/52cd86a2ecad041a5275299b-894-670/cooking-in-kitchen.png" alt="cooking in kitchen " data-mce-source="Marjan Lazarevski on Flickr " data-link="http://www.flickr.com/photos/mlazarevski/8108416027/in/photolist-dmvKAk-bBhrrt-ccheR3-h6qK16-8cZxre-8jppv4-drwjMi-9rBFtU-9RzYZn-9RA1dz-bhtReH-9RzZp6-9RCT93-9RzZBc-9RzZWt-9RA1bi-9RzZFx-9RCTHC-9RCTk5-9RzZDp-9RzZjc-9RCTam-9RCTpJ-9RA1rZ-9RCTcG-9RA12P-f7izvP-7XXEJA-b3P7Jr-7K7jBv-8SMzB4-9cW6BG-diqqVd-7FB5QG-fsUJ9j-dZzHeh-awxDV8-atnmmi-7XXHyo-cuGS77-9mCdpR-atnmoK-aqXYh7-9uWHEr-gtihHZ-7PFZRf-8aix2R-aQaeda-8CPkPn-bUcVfd-9ATbUm/" /></p>
<h3><strong>Cut Out Frivolous Line Items</strong></h3>
<p>Even when Jacobson and his wife went on vacation&mdash;which weren&rsquo;t lavish&mdash;they did it with saving in mind. &ldquo;We would sign up for a credit card reward program to get free flights and hotel,&rdquo; he says. &ldquo;Our honeymoon was 10 days hiking around Mt. Rainier in Seattle. It basically cost us nothing.&rdquo;</p>
<p>Johnson&mdash;who lives with his family in the townhouse he bought in 2004&mdash;carefully monitors their spending. It&rsquo;s a practice he started as a senior in high school, which made him realize how much money he spent simply buying lunch.</p>
<p>&ldquo;I still bring my lunch to work,&rdquo; he says. &ldquo;Is it worth spending $2,000 a year on lunch?&rdquo;</p>
<p>To get around the urge to eat out, Jacobson&rsquo;s wife spent a lot of time becoming a serious cook. &ldquo;Ninety percent of our food comes out of our kitchen, and her cooking is better than most any restaurant we could go to,&rdquo; he says.</p>
<p>The sacrifices paid off. They now are globetrotting around the world, spending a few months in different countries&mdash;now in Malaysia, Europe in the spring&mdash;with a $40,000-a-year budget. They have found they can live like kings on that budget in many low-cost countries.</p>
<h3><strong>Possibility Starts With a Good-Paying Job<br /></strong></h3>
<p>To be sure, these everyday millionaires were blessed with a few advantages that helped catapult their net worth. For starters, each had jobs that on average make more than the median income. Johnson works in pharma sales and marketing and, his wife, before staying home to care for their child, worked at a university as a department psychologist. Jacobson was an engineer at Microsoft and his wife was a project manager at Dell.</p>
<p>Kirkpatrick was a software engineer. He also has affordable health insurance in retirement because his wife, who was a public school teacher, was allowed to buy into her health insurance.</p>
<p>Rains&rsquo; husband still works as a logistics manager, working toward a full pension, and provides medical insurance through his work. Before, they profited from his company&rsquo;s stock program &ldquo;that did very well,&rdquo; says Rains, who previously worked for a regional bank and now is a part-time freelance writer.</p>
<p>As for college expenses, Rains had one son go to in-state university with affordable tuition that was covered by savings. Kirkpatrick&rsquo;s son ended up getting a full scholarship to a public university, while Johnson himself got a scholarship for his schooling. (His wife, though, ended up with undergraduate and graduate school debt. Both Jacobson and his wife were saddled with huge student loans they paid off.)</p>
<h3><strong><img class="center" src="http://static5.businessinsider.com/image/54ef6ea26da811c642f0c018-1024-768/money-107.jpg" alt="money" data-mce-source="Flickr/401(K) 2012" data-link="https://www.flickr.com/photos/68751915@N05/6848823919/in/photolist-bH1iX8-chEwR9-bt4mNt-42PQoC-a2YSa6-bta55K-dB7F8e-aFDjPB-aFATbM-aYWk56-aFAaK6-aFAQEv-dK2oa7-62QVKf-bZvUDS-QxcaH-bta3kH-brd1K2-dTUAhR-5p8w8o-7jm7SP-8F5t1j-dSZe91-dUSc9a-a5SwX-dSK3tm-biaRHp-68vjKV-68zxeQ-9C9vCS-aFAPtx-cMnty-9ZA9J6-cXNz15-9kJxyv-b6MUJK-68zxij-aFDkRt-aFDet2-bDwJ11-5DfGXv-bmm93i-55FLSR-aFDcrg-bf3Nge-nQZguc-bu6sBd-8usD9K-657VsP-5XW3k4" />Manage the Bumps in the Road<br /></strong></h3>
<p>The journey toward a seven-figure net worth wasn&rsquo;t always smooth. <strong>&ldquo;</strong>I did some dumb things in the beginning, fortunately with small sums of money,&rdquo; says Kirkpatrick. One of his most memorable mistakes was getting involved in the dot-com mania. &ldquo;I invested a few thousand dollars, quadrupled my money and then watched it go back down to the price I bought it at,&rdquo; he recalls.</p>
<p>Jacobson tried and failed at real estate investing and picking individual stocks. He ended up settling on index investing. &ldquo;It&rsquo;s easy, even if at first it feels like you aren&rsquo;t getting any traction,&rdquo; he says.</p>
<p>Rains found that she hadn&rsquo;t saved enough for her youngest son&rsquo;s college education. He went to an out-of-state school, which cost more. &ldquo;I definitely would have set aside money in a 529 more quickly when they got popular,&rdquo; she says. &ldquo;I would have also taken my child to visit more in-state schools during high school.&rdquo;</p>
<p>Johnson fell for his weakness for cars, but not too hard. He bought a BMW five years ago with all cash. &ldquo;If I take a step back, I could have saved $5,000 or $10,000 buying another car. Was it the smartest thing?&rdquo; he says. &ldquo;You got to live, too, and enjoy life. You can&rsquo;t always save. I still enjoy driving that car.&rdquo;</p><p><a href="http://www.businessinsider.com/secrets-of-four-everyday-millionaires-2016-2#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/great-pyramid-of-cholula-worlds-largest-pyramid-2016-9">The world's largest pyramid is not in Egypt</a></p>